The Teva Case: A Tale of a Race to the Bottom in Global Securities Regulation

Abstract

This article tells how a shareholder class action against Teva Pharmaceutical Industries, the largest generic drug maker in the world, ended the practice of hiding individual executive pay figures by companies crosslisted in Israel and the United States. That practice relied on a tenuous reading of the law, according to which crosslisted issuers are exempt from the pay disclosure requirements in both countries. It had nevertheless persisted with no regulatory response because both countries maintained a hands-off attitude toward crosslisted companies. While the class action prompted Israel to ensure crosslisted issuers disclose individual executive pay, crosslisted issuers continue to be less transparent in other areas. The story serves as an important reminder of the powerful race to laxity in the global competition for securities listings.

Keywords: Securities Regulation, Regulatory Competition, Race to the Bottom, Crosslisting

JEL Classification: G30, G38, K22