(CN) – Shareholders failed to prove that a majority of Bed Bath & Beyond’s board of directors knew about the company’s practice of backdating stock options, a New York appellate division ruled.
As shareholders realized that a number of public companies were backdating stock options, the Securities and Exchange Commission launched an investigation of Bed Bath & Beyond. Its October 2006 report “identified various deficiencies in the process of granting and documenting stock options” and acknowledged that “hindsight was used in selecting some annual grant dates.”
Nine days after the company disclosed the SEC’s findings, shareholders brought a derivative action accusing the company’s directors of violating securities law.
Bed Bath & Beyond moved to dismiss, claiming the plaintiffs failed to establish demand futility.
The 1st Appellate Division of the New York Supreme Court agreed that the complaint “lacks the particularity required to support a finding of demand futility.”
The court affirmed dismissal of the case.