Corporate governance stock option backdating dating secrets for
Another consideration in evaluating the nuances of a stock option plan involves the timing for issuance of stock options.If a stock option plan included a requirement that stock options would be issued annually on a certain date or after the happening of a specified event, any claim attacking the viability of stock option grants based on the implication of backdating would not necessarily pass muster.With the discovery of stock option backdating, directors and stockholders are not necessarily on the same footing since the backdating of options bestows upon those receiving them "in the money" grants.
In fact, touting its public policy interest in deciding the law on the stock option backdating issue, the Court of Chancery recently displayed its reluctance to relinquish its authority to decide such claims and refused to stay a derivative action challenging purported stock option backdating practices.
Without evidence of the director's knowing participation in what amounts to a violation of the stock option plan, hopeful plaintiffs might be unable to overcome this very difficult burden.
Conversely, if a board authorized a grant of stock options either with the knowledge that they were being backdated in violation of a stockholder-approved stock option plan or by failing to adequately inform themselves, the directors would, more than likely, subject themselves to potential liability for breach of their fiduciary duties.
Spawned by the research conducted by University of Iowa professor, Dr.
Erik Lie, and the article that first appeared in The Wall Street Journal in March of 2006, stock option backdating has become an increasingly important issue for all public companies.