Opening the Floodgates: Delaware Chancery Court Allows Shareholder Derivative Suit Against Board for Alleged Breach of Duty in Backdating Context

On February 6, 2007, in a sharply-worded opinion, the Delaware Court of Chancery (Chandler) allowed claims by a shareholder of Maxim Integrated Products, Inc. to proceed against current and former board members.

Just yesterday, in Double Dipping, Corporate Governance and Executive Compensation: Whose Duty is it Anyway, we asked about the oversight duty of directors and senior officers in stock option backdating scandals, and the Maxim Integrated Products opinion could open the doors to more derivative lawsuits against companies alleged to have backdated stock options.

On January 31, 2007, a special committee of the Maxim Integrated Products board announced in a press release that there was no “self-enrichment” to the board or officers but that it would restate earnings from fiscal year 2000 through fiscal year 2005 as a result of its investigation.

For a copy of the special committee’s press release, click here. For related coverage in the Wall Street Online Journal, click here. Here is a copy of the court’s landmark ruling in