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The following is provided for information purposes, and not meant to be legal advice.

Internal Revenue Code Section 409A may create litigation risks for directors and officers on the subject of employee stock option grants.  

Employee stock options are deferred compensation arrangements that are subject to Section 409A.  Nonstatutory stock options generally are taxable at the date of their exercise and not at their grant or vesting.
Section 409A preserves this treatment for stock option grants only if the stock option is granted with an exercise price at or above the fair market value of the underlying stock on the date of grant.

If an option is granted at a strike price below fair market value (FMV), of the underlying security, at the time of grant, the employee may be liable for accelerated taxes on the option as it vests versus when the employee decides to exercise the shares. Penalties for noncompliance include a 20% excise tax.

This issue is especially a concern for private companies, where, unlike for public companies, there is no common stock in the open market for directors and officers to determine the FMV of the underlying stock. 

Thus far, neither Section 409A nor the Treasury Department yield any guidance regarding acceptable methods for determining FMV for a private company which are sure to comply with Section 409A.