Tag Archives: shareholder

NY State Pension Sues BP for Stock Price Drop Following Spill

Here is an interesting excerpt from a Reuters piece published yesterday:

New York state’s pension fund plans to sue BP Plc to recover losses from the drop in the company’s stock price following the worst oil spill in U.S. history, state Comptroller Thomas DiNapoli said on Wednesday.

DiNapoli said the fund owned more than 19 million shares when the Deepwater Horizon rig exploded in the Gulf of Mexico in April.

“BP misled investors about its safety procedures and its ability to respond to events like the ongoing oil spill and we’re going to hold it accountable,” said the Democratic comptroller, who will stand for election in November in the race for New York comptroller.

The Pension’s action – and it stated basis for the lawsuit – is dramatic evidence of the risk companies can face from shareholder activism in light of EHS matters.  It further supports what BusinessWeek reported last week about the likely increased in shareholder demands related to EHS management and disclosure.

When It Spills, It Pours

In years past, we have seen a small – but growing – amount of shareholder activism in publicly traded companies concerning sustainability and environmental matters.  Several Fortune 500 companies have faced and defeated these attempts at requiring greater environmental risk assessment and disclosure.

2010 looks to be dramatically different.

Setting the stage in 2008, TVA experiences a catastrophic failure of an ash pond in Tennessee that also prompts EPA to initiate their own risk assessment of similar ash ponds across the country.

Then, SEC published its Interpretive Guidance on climate risk assessment/disclosure that is effective beginning this year.

On the H&S front, Massey Energy faces a mine disaster that claims 29 lives and raises the profile of MSHA enforcement gaps.

Now, BusinessWeek reports that investor groups are gearing up to require far more information and disclosure from the companies they invest in.  Some highlights of the article:

In the past, demands for risk disclosure tended to be viewed as hypothetical. In light of the Gulf disaster, [Robert Graham, founder and head of the environmental law practice at Chicago-based Jenner & Block] predicts that requests for such information will become more mainstream. “These issues are real and this disaster dramatically demonstrates how they impact a company’s balance sheet,” he says.

Companies will be pressed by shareholders to disclose more information about safety practices, the kinds of fail-safe mechanisms they have in place for high-risk operations, and their plans and prospects. Companies will have to reconsider the insurance they’ve arranged to better gauge how much and what kinds of coverage they need to cover potential risks. They’ll also need to figure out how much cash to set aside in reserve to cover unforeseen incidents that may cause environmental damage, he says. Shareholders will also start to insist on viewing companies’ safety records, including any sanctions received from federal or state agencies regarding their operations.

If your company is not already in the process of evaluating how to define and assess environmental matters in the context of “risk” rather than “compliance” or “management systems”, then you are probably behind.

Management of EHS Risk Triggers Shareholder Lawsuit

The Charleston (WVa) Gazette has reported that a trust fund owning a small number of Massey Energy company shares has filed a lawsuit against the company.

The suit was filed by the Manville Personal Injury Trust, which owns just 1,000 shares of the company.  The lawsuit alleges that Massey has violated a 2008 settlement with Manville.  That settlement was reached after Manville sued Massey, its CEO and Board of Directors in 2007 alleging mismanagement

in the wake of repeated water pollution violations, large fines relating to the deaths of two miners in the 2006 Aracoma Mine fire, and a nearly $2 million verdict against Massey for firing a worker who complained about safety problems.

The current lawsuit accuses that the company’s Board members “consciously breached fiduciary duties owed to the company and its shareholders.”