A new movement is pushing companies to adopt provisions which severely limit shareholders’ abilities to protect their rights in the courtroom. This would require that shareholders, including pension fund shareholders to submit to arbitration on any clams they have involving their investments. Other clauses would impose complete bans on shareholders participating in class actions.
Two cases recently decided by the Supreme Court enabled corporations to avoid liability in any class actions simply by including a forced arbitration clause in a service agreement or other contract. The Court upheld the waivers overriding state laws demanding accountability of corporate fiduciaries.
Corporations have begin including the arbitration provisions in agreements with shareholders. Forced arbitration clauses containing class action waivers in bylaws or corporate charters will prohibit shareholders in pursuing any legal remedy. Institutional investors will have no access to the courts at all.