BellSouth Corp., Abbott Laboratories and Wyeth are the largest companies, in terms of market capitalization, that are most likely to face securities class actions over the next 18 months, according to a report by the Corporate Library, a corporate governance research firm. The largest firms least likely to face a lawsuit are Mosaic Co., Weight Watchers International Inc. and Titanium Metals Corp. In all, the Corporate Library identified 75 companies most likely to face lawsuits and 50 others that were least likely.
The predictions were based on newly developed screens. The new analysis identifies six key factors which, in combination with share-price volatility, leverage and other performance fundamentals, "provide a reliable tool for assessing the probability of (securities class action)," according to a statement about the study. The key factors are: excessive CEO compensation; director age, tenure, over-commitment and lack of independence; percentage of institutional ownership; industry-specific risk; company size; and share trading volume.
The study contains suggestions for reducing the risk, such as trimming excessive CEO compensation. "Excessive CEO pay remains the single most statistically significant governance indicator of (securities class action) risk," the study said.
Scott Stoffel, Abbott spokesman, said, "At Abbott we have a long tradition of strong financial controls in corporate governance. Abbott is well respected in this area. We were once again named to the Dow Jones Sustainability World Index, which recognizes global leaders in sustainable business practices. We cannot comment further until we have the opportunity to review the report."
Naomi Kim, spokeswoman, Dow Jones Indexes, said Abbott Labs has been in the Dow Jones Sustainability World Index since 2005 and was reaffirmed as a component in the annual rebalancing last September. Abbott ranks 42d out of 317 companies in the index, based on criteria that includes corporate governance, codes of conduct, environmental performance, and social factors.
Brent Fowler, manager-corporate communications, BellSouth, and Douglas Petkus, spokesman, Wyeth, Madison, N.J., said they couldn't comment on the scores without seeing the report. Calls for comment were not returned by Linda Thrasher, Mosaic spokeswoman; Donna Fontana, Weight Watchers vice president-public relations; and Bruce P. Inglis, Titanium Metals vice president, finance-operations
