Lawyer Article
Delaware Chancery Court Finds Backdating and Spring-Loading May Violate Fiduciary Duties
March 1, 2007
In two separate cases, the Delaware Court of Chancery recently refused to dismiss complaints against directors who were allegedly involved in option backdating or spring-loading. Although the decisions related to whether the shareholders’ claims should be dismissed (rather than a trial on the merits) -- and although the court recognized that a board’s decisions regarding executive compensation generally are entitled to deference -- the court’s holdings emphasize that directors may face fiduciary liability for their actions -- or inaction -- related to option grant practices. These decisions are the latest developments in the well-publicized option timing scandal that has come under the scrutiny not only of shareholder-litigants but of the SEC and other regulators as well.
Follow this link to our client alert discussing these recent developments.
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