in Re General Motors Derivative Litigation

Outcome: Settlement

Description: Plaintiff filed this derivative shareholder action on behalf of General Motors against certain of the Companies’ Officers and Directors, alleging that the Directors failed to properly oversee the Company’s financial reporting, causing loss to the Company and its shareholders. The Settlement consists of major governance reforms designed to address these accounting problems and to increase the power of the Company’s Independent Directors. Under the terms of the Settlement, GM agreed to adopt significant corporate governance improvements that are designed to remedy the alleged accounting and oversight problems underlying the litigation and increase the power of the Independent Directors. The corporate governance reforms were developed with the significant involvement of Harvard Law School Professor Lucian Bebchuk, one of the foremost experts on corporate governance, and he is the Director of the Program on Corporate Governance at Harvard Law School. The following are among the corporate governance improvements obtained by Plaintiffs’ counsel in the Settlement: • the addition of a second “audit committee financial expert” to the Board; • limits on the number of audit committees on which Directors may serve; • limits on the number of other companies’ boards on which Directors may serve; • empowering the general auditor to have direct access to the Audit Committee Chair; • encouraging Audit Committee and Board members to visit GM facilities and to seek information relevant to their service; • ensuring that relevant materials are provided to Audit Committee members at least 48 hours before Committee meetings; • ensuring that, upon a material restatement or reclassification, the Audit Committee makes appropriate inquiry about the cause to determine if any other action should be taken and if additional internal controls should be implemented to prevent recurrences in the future; • ensuring that the Executive Compensation Committee will review the current Executive Compensation Recoupment Policy to determine if it should be revised; • mandating that Directors attend the annual meeting, at least 75% of the Board meetings and 75% of the meetings of committees on which they served for two consecutive years or face the prospect of not being re-nominated to the Board; • requiring that materials are sent to Board Members at least 48 hours ahead of meetings; • ensuring that the Board, the DCGC and the Audit Committee have the opportunity to meet in executive session at least three times per year, without management present; • requiring that the Presiding Director shall be elected by the Independent Directors and that the Presiding Directorship shall rotate at least once every five years; • permitting subjective factors to be used by the Independent Directors in evaluating the CEO’s performance; • enabling the Presiding Director to take the lead in reporting to the Board on succession planning for the CEO; • allowing the DCGC to confer with whomever it prefers regarding Board committee assignments and chairmanships; and • allowing the Presiding Director to have final approval of the agenda for Board meetings, including addition and deletion of agenda items. GM has implemented all of the agreed-upon governance changes and the Court granted approval of the Settlement on December 22, 2008. The Court also awarded $5 million in attorneys’ fees to Plaintiffs’ counsel, and reimbursed expenses of $384,145.49.