Exclusivefocus - National Association of Professional Allstate Agents ...

that are occurring. Defendants’ wrongfulcourse of conduct ... has exposed theCompany to regulatory liability, judicialfines and caused substantial losses to Allstateand other damages, such as to itsreputation and good will.”Typically, disparate events lack a commondenominator. I believe, however,these events are tied together by a corporateculture that has existed for far toolong among Allstate’s senior executiveswhose performance-based compensationmay indicate their incentives are forshort-term profits and stock gains overthe longer-term health of the company.Performance-based compensation can actas a motivator for manipulating companybooks in order to increase the value ofIt adopted these techniques after beingtold by a consultant that these systemswould put them in a ‘zero-sum game’ withclaimants, including their policyholderswho filed claims, in which Allstate shareholderswould benefit financially at theexpense of policyholders.”• May 2008. According to its Website, “Audit Integrity is the leading providerof accounting and governance riskanalysis on public companies. Throughthe forensic study of the factors behindfraud, Audit Integrity proprietary modelingeffectively detects and measuresfraud and transparency-related risks inover 8,500 publicly traded corporations.”In addition to forecasting material financialrestatement risk, and equity performancerisk, it also identifies companiesthat are “at risk of financial and governanceproblems that can lead to class actionlitigation.”As evidenced by the chart labeled “3Year AGR Score” found elsewhere in thisarticle, Allstate is “currently rated as having[an] Aggressive Accounting & GovernanceRisk.” So while Allstate seems tobe risk-averse on the property-casualtyside of its business, the same cannot besaid for its approach to corporate governance.An aggressive stance can produce,and even invite, such class action lawsuitsas the January 2008 shareholder derivativeclass-action lawsuit, Fojas vs. Allstate,which charges “breaches of fiduciaryduties, abuse of control, gross mismanagement,and waste of corporate assets20 — Exclusivefocus Spring 2009