"Investor Clap Back": Should Investors Sue When Their Companies Harass?
The #MeToo movement appears to be affecting some publicly traded companies right where it hurts – in the pocket! Last week, Wynn Resorts (the Las Vegas-based casino) was slammed with a lawsuit from its own shareholders. The lawsuit, filed in Nevada state court by Massachusetts-based Norfolk County Retirement System on behalf of Wynn Resorts Ltd, alleges that the company breached its duty to shareholders by ignoring years of sexual misconduct by CEO Steve Wynn. Shareholder derivative suits are lawsuits brought against the management of a company on behalf of the company itself and all its shareholders.
In an article recently posted on Law360, plaintiff’s attorney Nicholas E. Chimicles noted: “[s]hareholders of Wynn Resorts were entitled to rely on their management’s stewardship of their investment. Instead, the officers and directors of the company turned a blind eye or, even worse, were complicit in enabling, aiding and concealing the blatant misconduct of Steve Wynn, and such misconduct has jeopardized the business operations and prospects of the company.”
Similar to the Wynn action, a claim against 21st Century Fox alleging breach of fiduciary duty by management was settled in November for $90 million.
Given the momentum of the #MeToo movement and the depths of powerful American business men that have been affected, it is not surprising that these lawsuits have been filed. This could be just the beginning of the “investor clap back” movement. As employment discrimination lawyers, we see how sexual harassment impacts companies on a smaller scale. Perhaps a larger scale movement on behalf of all shareholders will cause companies to make greater changes to prevent harassment from happening in the future.
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