Recently, a shareholder filed a lawsuit on behalf of himself and other shareholders of a company (also called derivative action) on the basis that the company’s president and board of directors breached their fiduciary duties when they entered into a stock incentive plan as part of the president’s compensation.

The real thrust of the lawsuit was that the board gave the president too many shares and the president accepted too many shares, which resulted in diluted stock value for the company and shareholders. The court has allowed the breach of fiduciary duty claim to go forward, which means the board may be liable to the shareholders for its failure to act with the proper degree of care. For more, click here.