Family Dollar (NYSE: FDO) has settled shareholder lawsuits relating to the backdating of stock options issued to executives at the company. Under the terms of the settlement, Chairman and Chief Executive
The company will also institute corporate governance reforms including the adoption of a majority-vote policy for uncontested elections of directors and the election of two additional independent directors.
Here's what bothers me: The company will be taking a charge of $5.7 million related to the settlement, including $3.5 million to cover the attorney's fees of the shareholders who brought the lawsuits.
This is my question: Given that the company clearly had ineffective internal controls that allowed top executives to receive backdated stock options, why should the company's shareholders have to pick up the tab for the legal fees? CEO Howard Levine made more than $3.1 million last year. Since he and other executives and directors were the ones responsible for options backdating, why shouldn't they pay legal fees?
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