Protecting clean energy innovators
THE COMMONWEALTH'S clean energy sector is growing at 20 percent per year - faster than any other local industry - and currently accounts for more than 14,400 jobs in Massachusetts. The Bay State is now a recognized leader in this field, with more than 550 clean energy companies headquartered here.
Massachusetts is already home to many of the clean energy industry's brightest stars, including
Globally, the clean energy sector grew from $55 billion to $77.3 billion between 2006 and 2007, an increase of more than 40 percent. It is projected to grow by more than 300 percent, to $254.5 billion, by 2017, according to CleanEdge, an independent analyst firm. Moreover, cleantech investments in the United States grew by 46 percent from $1.5 billion invested in 2006 to $2.2 billion invested in 2007, according to the PWC/NVCA MoneyTree Report based on data from Thomson Financial.
Unfortunately, along with the state's success, there is also a rise in lawsuits that threaten this opportunity. As companies in the clean energy sector prosper, many will consider an initial public offering, and this is where the problem arises.
Traditionally a measure of success, admission to the IPO club today means becoming a target of unwarranted legal action by lawyers attempting to capitalize on typical tech stock volatility.
This problem has become significantly worse: In 2008, 27 percent of public companies face a high risk of being sued compared to 17 percent in 2007, according to The Corporate Library, an independent corporate governance research group in Portland, Maine. In addition, the number of US companies in securities class action litigation rose by 43 percent between 2006 and 2007.
If Massachusetts is to take full advantage of its clean energy opportunity, it needs to reform the legal system that rewards corporate ambulance chasers at the expense of innovation and economic growth. If Massachusetts companies shy away from accessing capital in the public markets, investment will slow and opportunity will recede.
While the legal system is one of the country's greatest achievements, it is a work in progress and must evolve. Specifically, we need to raise the bar and make sure that litigation brought against public companies requires more than just allegations as evidence, and we need to penalize lawyers and law firms with a track record of initiating opportunistic lawsuits that don't reflect the best interest of shareholders.
Organizations like the US Chamber of Commerce Institute for Legal Reform and the Manhattan Institute's Center for Legal Policy have become strong advocates for change and are fighting for legal reform. Massachusetts-based businesses that are interested in promoting a legal system that makes sense, protects investor interests, and promotes innovation should become involved.
In the absence of such measures, Massachusetts and other centers of innovation across the nation will suffer, their progress inhibited by profit-takers whose motive is not to uphold the integrity of corporate America, but merely to extract settlement payments which benefit themselves far more than the shareholders they supposedly represent.
Never in the nation's history has innovation been so important - never has it been so closely linked to the well-being of our civilization and our planet's ability to sustain us. Massachusetts can and will play a crucial role as a leader in clean energy innovation, but it will not be easy - and need not be made more difficult by the impediments presented by unwarranted lawsuits.
We should act now to implement reform. We must ensure that the innovation, growth, and market success that drive our local economy are rewarded - and not unjustly punished.
Nick d'Arbeloff is the executive director of the New England Clean Energy Council.
