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ARTICLE · 20 JUNE 2006

Stock Option Questions May Hit Close to Home

Pillsbury Winthrop Shaw Pittman
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The backdating of stock option grants by public companies continues to be a focus of news stories and law enforcement investigations. What initially appeared to be an issue associated with some technology companies may in fact be more widespread, possibly extending to hundreds of companies.

United StatesStrategy

By Mark Hellerer, Jeffrey Zuckerman, Bruce Ericson and Clifford Hyatt

The backdating of stock option grants by public companies continues to be a focus of news stories and law enforcement investigations. What initially appeared to be an issue associated with some technology companies may in fact be more widespread, possibly extending to hundreds of companies.

The consequences are potentially significant. It has been reported that several dozen companies have received inquiries from the SEC or grand jury subpoenas from the United States Attorney’s Offices in Manhattan, Brooklyn and San Francisco. Shareholders have filed over 60 civil lawsuits alleging breach of fiduciary duty and other improprieties and a number of executives have resigned or have been terminated following internal investigations of option grant practices. It is widely believed that this is just the beginning of a tidal wave of regulatory scrutiny and litigation.

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