Scrushy's Legacy

A hospital chain engulfed in an accounting scandal earlier this decade plans to reimburse activist investors if they successfully unseat directors in proxy fights.

It's an interesting move for HealthSouth Corp., which saw five chief financial officers plead guilty while CEO Richard Scrushy fought charges of fraud over the past six years. Scrushy was acquitted in 2005 in a major embarrassment for federal prosecutors. This past June, he was ordered to pay almost $2.9 billion in a civil lawsuit brought by shareholders.

The Birmingham, Alabama-based company, which operates rehabilitation hospitals, says it plans to amend its corporate bylaws this week. It's believed to be the first large company to adopt such a measure and has huge implications for investors. Proxy fights are expensive and this move potentially evens the playing field for activists who have a case to unseat board members. The Wall Street Journal reported the plan prior to the company release.

"Given the history of HealthSouth under its prior management team, we believe this company should be innovative and a leader in corporate governance issues among public companies," director Charles Elson says in a statement.