I recently came across this interesting August 20, 2008, article authored by Nicholas Rummell at FinancialWeek.com, discussing a report issued that same day by the Corporate Library finding that CEO compensation tended to increase rather than decrease following a securities class action against the company. The report appears to focus on compensation decisions following the mere filing of the lawsuit, as opposed to its resolution. Also, as the Financial Week article points out, the report does not take into account cases filed after the stock option backdating scandal broke.
It is difficult to draw any clear conclusions from the article without reading the report itself (which is available for purchase at the Corporate Library website), but the implication seems to be that the financial impact of securities class action lawsuits is being borne by shareholders rather than the executives. It would be interesting to see if the same trend holds true after there has been a large payout due to a verdict or settlement.