Shareholder derivative action is an important mechanism that allows shareholders to pursue litigation against parties that may harm the organization. It plays a critical role in providing legal rights to shareholders in terms of controlling and managing a corporation. The mechanism is also designed to prevent unlawful actions committed by directors and officers of the company. It might significantly decrease the probability of such violations as unjust enrichment, corporate waste, and abuse of control. Furthermore, it may have a positive impact on corporate social responsibility. As the issues of social justice and lawful conduct receive more and more attention, shareholder derivative lawsuits appear more and more frequently. In addition, recent lawsuits involve huge corporations and have led to heavy fines. Such tendencies may indicate that the legislation related to shareholder derivatives is increasingly being used in practice. As a consequence, corporations become more considerate towards organizational culture and cultural responsibility. However, in some cases, introduced fines may be insignificant and have little effect. Therefore, the legislative norms may require further development and adjustment.
Alphabet’s sexual misconduct lawsuit represents one of the largest cases related to shareholder derivative suits. The lawsuit was introduced against two directors of the company. They were accused of sexual misconduct, breach of fiduciary duty, and abuse of control (LaCroix). These two shareholder derivative lawsuits were also filed against the organization. The court’s decision did not only provide penalties but also forced the company to develop frameworks that could prevent the occurrence of such problems. Consequently, three critical elements were introduced as Alphabet was obligated to reform employment policies, fund workplace initiatives, and provide a press release (LaCroix). These measures may play a considerable role in improving cultural responsibility in Alphabet. It may also serve as a prime example for other companies that face similar problems.
LaCroix, Kevin. “Alphabet Establishes $310 Million Fund in Google Sexual Misconduct Lawsuit Settlement.” The D&O Diary, 2020, Web.