Erik lie option backdating
If the recipient of a backdated stock grant is incapable of realizing any immediate value from the option due to a vesting period, it is less likely that the backdating at issue would be viewed as a deliberate manipulation of options by the directors and officers in order to orchestrate an instant windfall to the recipients thereof.Was The Backdating Of Stock Options Properly Disclosed?What Are The Terms Of Any Stockholder-Approved Stock Option Plan?A primary focus in adjudicating the validity of stock option backdating includes the mechanism by which directors have authority to grant various stock options.Given the Delaware Court of Chancery's prominence in adjudicating disputes relating to companies incorporated in the State of Delaware, it comes as no surprise that several decisions from that Court provide some insight into how claims alleging breach of fiduciary duty based on backdating of stock options may be viewed.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.Spawned by the research conducted by University of Iowa professor, Dr.
As previously discussed, the primary goal of backdating is to procure an enhanced return for the recipients of the stock options.
This holds true even if the directors possessed a reasonable basis on which to grant such awards.
Is There A Vesting Period For The Backdated Stock Options?
The granting of stock options to executives and directors began as a method by which a company could award those that managed its future.
This concept created more of a level playing field between directors and stockholders since, with the granting of stock options, both directors and stockholders were working toward the same end - namely, overall success of the company.