Stock Option Backdating – How Does The Court Of Chancery Determine Breach Of Fiduciary Duty?
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. 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. 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. Stock option backdating, of course, refers to the practice of publicly traded companies issuing stock option grants retroactively in order to coincide with low points i
