Cnet options backdating
First, to the extent a director materially benefited from a backdated option, he or she would not be disinterested under the first prong of the Aronson test. Second, as Justice Holland explained in Seinfeld, permitting a single shareholder to hound a corporation with exclusively personal requests for books and records is a waste of corporate resources that engenders no benefit for the shareholders in general. Thus, to the extent that plaintiffs could plead with particularity facts demonstrating that a majority of the directors received backdated options, demand would be excused. The proper purpose requirement protects against such wealth-reducing outcomes. Specifically, the parties disagree about whether plaintiffs may properly inspect books and records predating plaintiffs' ownership of stock. Section 220 provides shareholders of Delaware corporations with a qualified Any stockholder, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose, and to make copies and extracts from: (1) The corporation's stock ledger, a list of its stockholders, and its other books and records. For example, a shareholder seeking a books and records inspection under section 220 in order to investigate mismanagement or wrongdoing "must present `some evidence' to suggest a `credible basis' from which a court can infer that mismanagement, waste or wrongdoing may have occurred." Here, as noted above, the plaintiffs have identified two purposes, but both really relate to plaintiffs' desire to bring derivatively in California a suit alleging a breach of fiduciary duty in connection with backdated options granted by CNET.
All books and records establishing the specific chronology and events leading to the stock option grants alleged in the Amended Consolidated Verified Shareholder Derivative Complaint and exercise prices and grant dates associated therewith.4. Apr., 30, 2007) (order allowing leave to amend and denying motion for reconsideration). All books and records showing the extent to which the CNET compensation committee delegated (or did not delegate) to management, either expressly or by custom and practice, the authority to select the exercise price or grant date of stock options under the 1997 plan and, if such delegation occurred, the extent to which the compensation committee was made aware of the exercise prices and dates selected. Judge Alsup also noted that those categories were without prejudice to other possible requests, and ordered plaintiffs to make their books and records demand by May 14, 2007. May 9, 2007) (stay pending books and records demand). Indeed, on May 14, 2007, plaintiffs sent their demand to inspect books and records to CNET via certified mail.
In this demand letter, plaintiffs made six requests: 1.
In so arguing, defendant relies heavily on Polygon Global Opportunities Master Fund v. In Polygon, Vice Chancellor Lamb refused to grant an investigation under section 220 where the shareholder, an arbitrage fund, purchased shares in the West Corporation after an announced reorganization and then sought a books and records inspection to look into potential derivative claims in connection with the proposed reorganization plan.