Public Companies in U.S. Unprepared for Growing Number of Lawsuits
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Executives at public companies in the U.S. are underestimating the likelihood they will be sued. According to a risk survey by Chubb (NYSE: CB), 80 percent believe it is unlikely. This number is far below statistics estimates, according to the report.
For example, just being the target of an acquisition will increase a company’s chances of being sued by shareholders to 90 percent. Companies should also expect more lawsuits because of the Foreign Corrupt Practices Act. Companies can thank Wal-Mart (NYSE: WMT) for increased enforcement in this area, since WMT recently made headlines for bribery charges in Mexico.
In 2011, there were a record-high number of settlements for FCPA violations. Yet a majority of Chubb's survey respondents (78%) are not worried about an investigation due to an FCPA violation, and 13 percent have decreased the financial and human resources the company allocates toward mitigating losses related to the law.
For example, just being the target of an acquisition will increase a company’s chances of being sued by shareholders to 90 percent. Companies should also expect more lawsuits because of the Foreign Corrupt Practices Act. Companies can thank Wal-Mart (NYSE: WMT) for increased enforcement in this area, since WMT recently made headlines for bribery charges in Mexico.
In 2011, there were a record-high number of settlements for FCPA violations. Yet a majority of Chubb's survey respondents (78%) are not worried about an investigation due to an FCPA violation, and 13 percent have decreased the financial and human resources the company allocates toward mitigating losses related to the law.
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