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There’s one legal way to insider trade — but maybe there shouldn’t be

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It is difficult to understand why the federal government and the province of Quebec have bent over backwards to accommodate Bombardier Inc. Even with massive federal and provincial loans, the corporation has been unable to rebound. Furthermore, its dual-class share structure insulates the board from being replaced when it is performing poorly. That is the governance background against which we should consider Bombardier’s Automatic Share Disposition Plan (ASDP), which allows executives to exercise their options and sell the resulting stock.

ASDPs permit insiders to make trades in accordance with pre-arranged instructions given when participants are not in possession of material undisclosed information. ASDPs thus have the effect of protecting insiders from the reputational harm that could accrue to them and the corporation if they trade, or are alleged to have traded, on the basis of material undisclosed information. ASDPs typically seek to ensure that improper trading does not occur during a blackout period (the period of time around which financial information is periodically released).

Dual-class executive stock-option plans like Bombardier’s may put outsiders at an information disadvantage

Corporations can implement ASDPs as long as their insiders meet certain conditions. At the time the ASDP is........

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