Key to Avoiding Compensation Suits

by Edward Labaton

July 01, 2008

Abuses of executive compensation provide no end to work for plaintiffs' lawyers pursuing class-action litigation against, and derivative suits on behalf of, companies that-in issuing options or stock to senior executives-expose themselves to the risk that these grants will be misused through backdating and insider trading.

Prof. Jesse Fried of the University of California at Berkeley offers two new, practical approaches companies can adopt to help prevent insider trading and options backdating litigation.

Those are well worth reviewing. In 2007, the U.S. Securities and Exchange Commission (SEC) brought more insider trading cases than it had in the entire decade of the 1990s. And according to SEC Enforcement Director Linda Chatman Thomsen, this pace will increase in the near future.

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