The Advisors' Blog

– Liz Dunshee

Recently, a member posted this query in our “Q&A Forum” (#1245):

Is anyone aware of any guidance out there on whether, in delegating the authority to an officer to grant options pursuant to DGCL Section 157(c), a board could give the officer the ability to decide the vesting terms of the option (e.g., officer can choose whether to grant a 1 year, 3 year, or 5 year option)? Or is that something that must be set by the board pursuant to DGCL Section 157(b)?

An anonymous member responded:

You’ll probably want to run this one by a Delaware lawyer – but I’ve had some tell me they read Section 157(c) narrowly and do not allow a delegated officer the discretion to fix vesting terms. They were comfortable that the Board or Comp Committee could choose a variety of forms of agreements – such as one with 1-year vesting, one with 3-year vesting and one with 5-year vesting, and then the delegated officer can pick which form is used for individual awards – but they were not comfortable in allowing the officer complete discretion to set vesting terms.

I tend to disagree with the view because I think that the vesting term is inherent in setting the size of an award.