Legal action. (Rants and Raves).

Vanessa Magness's article, "How green pays," (February 2003) is very interesting and a useful addition to current readings on a subject that is bound to become of increasing interest to a large number of companies as they spend more to cope with environmental pressures.

The author points out the difference between how U.S. and Canadian reporting companies' stock prices respond to negative news about environmental incidents. In addition to the factors identified be author, one more very significant factor is likely the exposure to very major sums extracted from U.S. companies that face class legal actions, and courts in several states that are renowned for the approval of settlements and damages that are many, many times the cost of any government fines or penalties.

Shareholders of Halliburton, for example, did not wait around to find out about the substance of the claims made by the U.S. Government regarding the sale of brake linings incorporating asbestos fibres by a subsidiary (Dresser was a company they acquired that had stopped the practice of using asbestos in these products long before the date of acquisition). The stock price dropped 80% in short order as investors anticipated the immensity of the bad news to come. There are now 200,000 pending asbestos claimants awaiting a court award.

In Canada, while class actions are becoming more common, the courts are not inclined to treat such claims with such generosity. Thus stock prices do not respond to similar bad news so violently.