August 29, 2007
State Courts and Options Backdating
Early this year the Delaware Chancery Court, in two opinions,, In re Tyson Foods and Ryan v Gifford, allowed shareholder derivative suits to proceed that were based on dating compensatory stock options. In one suit the allegation was that spring loaded options (options given before the announcement of favorable news) could be deceptive if they were disclosed only as "at the market" grants. In a second suit, backdated options could be a breach of fiduciary duty. Both opinions were a clear declaration that options dating practices were potential violations of state law as well as federal law. At issue is whether plaintiffs attorneys have taken full advantage of the opening.
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