Backdating Suits Seek More Than Reforms

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LEGAL ACTION

While the staggering settlements in securities class action suits have grabbed the headlines in recent years, D&O underwriters are keeping a close watch on a similar but less prominent variety of legal action: the shareholder derivative suit. More than 140 such suits related to the stock option backdating scandal have been filed in U.S. courts to date.

Shareholder derivative lawsuits are actions brought by the shareholders of a company on behalf of the company itself against a third party, usually the corporation's directors and officers. The plaintiffs may allege, for example, breaches of fiduciary duty, negligence, mismanagement or self-dealing. Most …