Aliment (of Williams Kastner & Gibbs, PLLC); George E. Phillips (of Orrick Herrington & Sutcliffe, LLP); and Gregory J. Sulkin (of Mc Naul Ebel Nawrot & Helgren), for defendants. Tefft on behalf of Association of Washington Business, amicus curiae. ; and"If Washington follows Delaware's demand futility standard, does it also follow the reasoning of Ryan v. BACKGROUND2 In 2006, The Wall Street Journal published an article by Charles Forelle & James Bandler, The Perfect Payday--Some CEOs reap millions by landing stock options when they are most valuable. Exercising them after it has reached $ 50 would bring a profit of $ 20 times 100,000, or $ 2 million. See In re Guidant S'holders Derivative Litig., 841 N. 2006) (noting largely statutory trend toward universal demand).12 However, it appears to us that most states that have adopted the universal demand standard have done so by statute. This is also the standard embodied in the 2005 Model Business Corporations Act (MBCA), of which our legislature is doubtlessly aware.
While this doesn't prove chicanery, it shows something very odd: Year after year, some companies' top executives received options on unusually propitious dates. " (CFRA Report), where it "reviewed the option prices of 100 public companies and, based upon an analysis of the exercise prices of option grants with reference to the companies' stock prices, concluded that 17% of the subject companies, were in CFRA's view, 'at risk for having backdated option grants.'" Order to Show Cause at 2 (quoting CFRA Report). Plaintiffs assert that the odds of this happening randomly are 1 in 2,764,905 and that "on average, between 19, defendants received a 788.6% return on their backdated stock option grants while shareholders received, on average, only a 19.9% return over the same time period." Am. They claim this was part of "a secret and undisclosed scheme to grant in-the-money stock options to themselves and other F5 insiders by backdating stock option grants to coincide with monthly low closing prices for the Company's common stock and falsify F5's financial and proxy statements." Id. They claim that the defendants were "materially overstating the Company's net income and earnings per share and understating its net losses and losses per share." Plaintiffs allege defendants "collectively realized over $ 161.2 million in illicit compensation through the exercise of illegally backdated options grants and subsequent sale of F5 stock." Id. Nejat Seyhun, The Economic Impact of Backdating of Executive Stock Options, 105 MICH. "[I]f the timing of options grants is an arm's length process, and companies have [not] systematically taken advantage of their ability to backdate options within the [twenty] day windows that the law provided prior to the implementation of Sarbanes Oxley in 2002, there shouldn't be any difference between the two measures."Ryan v. After its compensation practices were identified as being potentially problematic, F5 hired outside legal counsel and accountants and began its own investigation.
Certification From the United States District Court for the Western District of Washington in IN RE F5 NETWORKS, INC., DERIVATIVE LITIGATION.
LOCALS 302 AND 612 OF THE INTERNATIONAL UNION OF OPERATING ENGINEERS-EMPLOYERS CONSTRUCTION INDUSTRY RETIREMENT TRUST ET AL., Derivatively on Behalf of F5 Networks, Inc., Plaintiffs, v.
The Securities and Exchange Commission has closed an investigation into stock options backdating at CNET Networks without charges.
The news came as a surprise, since the SEC has been aggressively pursuing companies for backdating stock options, the Recorder reports.