Q&A: Michael Klausner, Stanford University
Stanford Law Professor Michael Klausner is interviewed by Business Insurance regarding his work in securities litigation.
Michael Klausner is the Nancy and Charles Munger Professor of Business and Professor of Law at Stanford University in Palo Alto, Calif. Mr. Klausner teaches and writes in the areas of corporate law, corporate governance, business transactions and financial regulations. Before joining the Stanford Law School faculty in 1997, he was a law professor at New York University School of Law, a White House Fellow and deputy associate director in the Office of Policy Development in the White House, and a corporate law practitioner with Gibson Dunn & Crutcher L.L.P. in Washington and Hong Kong. He discussed his research on securities litigation with Business Insurance Senior Editor Judy Greenwald. Edited excerpts follow.
Q: You have a database that covers all securities class actions and U.S. Securities and Exchange Commission enforcement actions filed since 2000. What are some factors that lead to large settlements?
A: Factors that lead to large settlements include financial restatements and parallel SEC actions; if there is a public pension plan or a union as a plaintiff; if the misstatement is made in the context of a public offering or an (initial public offering) or another offering; and if the plaintiff can show that the executive compensation arrangement led to larger compensation as a result of misstatement — that'll bump up the settlement as well.
Q: Based on the data you've seen, what would you recommend companies do to avoid litigation?
A: The way these cases come up is that there's a misstatement in disclosure documents or in a filing with the SEC, so care in the disclosure process and in overseeing the disclosure process and in maintaining internal controls are all the ingredients to avoiding a misstatement. It may be easier said than done, but that's pretty much what's necessary.
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