Shareholder options actions proceed against directors.(Delaware)
Trial, May, 2007 by Heylman, Susan
The intentional backdating or "spring-loading" of stock options by corporate directors, if proven, would be a breach of the good-faith element of the duty of loyalty sufficient to rebut the business judgment rule, the Delaware Court of Chancery has held in two shareholder derivative lawsuits. (Ryan v. Gifford, 2007 WL 416162 (Del. Ch. Feb. 6, 2007); In re Tyson Foods, Inc., Consol. Shareholder Litig., 2007 WL 416132 (Del. Ch. Feb. 6, 2007).)
In options backdating, a company issues stock options on one date but provides fraudulent documentation indicating that the options were issued earlier. In spring-loading, a company grants options shortly before releasing good news that directors know will increase the stock's price.
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