Think of it like settling a lawsuit over a broken stair step that led to an accident by insisting, in addition to medical expenses, that the step be fixed and regularly monitored. These changes can include strengthening the board, especially the nominating, audit, and compensation committees, requiring shareholder votes on issues like golden parachutes and buybacks, and enhanced disclosures.

Plan sponsors that have suffered a significant loss may file a claim to signal to their stakeholders they’re doing everything they can to recover assets on their behalves. But lawsuits can also be launched to affect corporate governance.

“If a case is filed and there’s a settlement, the dollars come first,” [W. Mark McNair, a securities litigation lawyer at Kaplan Fox & Kilsheimer LLP] says. “After that is negotiated, you can try to seek some needed corporate governance changes. That’s an important factor, particularly now when there are a lot of cases where there’s an [environmental, social and governance] component. It’s not just the money being recovered, it’s also the feeling that they’re making a difference.”

Institutional investors’ class action lawsuits aim to affect corporate governance changes | Benefits Canada.com

McNair recommends the “free” portfolio monitoring service, where law firms regularly review holdings to identify litigation-worthy portfolio companies. While that may be blatantly self-serving on behalf of his firm, it may also be of value as long as there is no requirement to file a claim or retain the firm.