In an opinion Thursday, Judge Sweet rejected a proposed settlement of a shareholder derivative case because the consideration for the settlement consisted of three corporate governance reforms that were all but meaningless, such as a commitment to vague and unspecified “training” and a commitment to maintain the same ethics code that existed all along and that apparently didn’t help prevent the underlying wrongdoing:
First , [the company] is required to “maintain its extant Code of Ethics ” and to “continue its practice of having all employees read the Code of Ethics.” The language of this proposed reform demonstrates that it confers no meaningful benefit or any benefit at all on the Company and its shareholders beyond what was already in existence prior to the filing of the complaint and the time of the alleged wrongdoing.
Second, pursuant to the Proposed Settlement, [the company] is required to provide “training” for its employees in the Company’ s executive offices on “issues relevant to the Company on securities, compliance, insider trading, ethics, and conflict of interest issues, for a period of at least one (1) year following the Settlement.” There is no specified requirement that the training be for a minimum number of hours [or] that it cover any mandatory topics . . . . Due to its lack of specificity and limited duration, this proposed reform cannot be considered substantial.
The third proposed reform provides that [the company] is required to provide “education/training” for its directors “on issues relevant to the Company on securities, compliance, Board professionalism, insider trading, ethics, and conflict of interest issues .” . . . . . [T]his measure suffers from many of the same problems as the employee training reform.