posted on Sep, 27 2008 @ 10:46 PM
Derivative suits are lawsuits that are brought by shareholders of a corporation against officers and board members of the corporation to recover
damages for some harm. In theory, the corporation itself (through a shareholder or shareholders) is suing the officers or directors. Many people
criticize derivative suits because they usually involve a lawyer finding somebody under some rock who may own small amounts of stock in some
corporation suing over a speculative harm. The lawyers in such cases end up taking a large sum of money to settle the suit for a harm that is
speculative, and the money paid does little to deter or alter the behavior of executives or boards members.
In the current crisis however, derivative suits can be a useful mechanism for punishing executives and board members who squandered money away. These
suits can be used to chase these people to the ends of the earth and pick their pockets clean of any money they had.