On August 15th, Delaware Chancellor Chandler again refused to dismiss a lawsuit against Tyson Foods directors over the alleged “spring-loading” of stock options. Kevin LaCroix notes in his “D&O Diary” Blog that the Tyson ruling is noteworthy because of Chancellor Chandler’s conclusion the directors may have failed to provide the disclosure required by their fiduciary duties. The Chancellor’s first refusal to dismiss came in February. Both court opinions are posted in our “Backdated Options” Practice Area on CompensationStandards.com.
More than 100 companies face lawsuits over option grant practices – and over 220 companies have disclosed that they are being investigated by regulators. Most lawsuits alleged backdating of option grants to coincide with share price declines; very few allege spring-loading. And, so far, all SEC Enforcement activity has challenged backdating, not spring-loading.
Backdating: Are the Lawyers to Blame?
Lately, the SEC has been charging quite a few lawyers over their roles in option backdating. In fact, the SEC charged one lawyer yesterday for her role in backdating at two different companies. Yesterday, CFO.com ran this interesting article entitled “Backdating: Are the Lawyers to Blame?”
Backdated Options: AFL-CIO Pressures Big 4 Directly
Here is a copy of the letter that I understand went to each of the heads of each of the Big 4 accounting firms from the AFL-CIO. It provides a view on what auditors should know about option procedures and processes – and steps auditors should be performing when auditing issues related to options.
– Broc Romanek