Dow Drizzles on LBO Parade

Kreinberg couldn't immediately be reached for comment. But any exec or director found putting his or her personal interests above those of shareholders could find themselves in peril, says Stuart Meissner, a private securities fraud attorney in New York who previously served under former New York Attorney General Eliot Spitzer.

"The conflict comes in because they will gain a benefit from the purchase that other shareholders will not receive," says Peter Henning, professor of securities law at Wayne State University in Detroit, referring in general to allegations of officials using their positions for personal benefit. He cites, speaking hypothetically, "at least the perceived benefit of control, through the use of their knowledge of the company."

But both accused officials have been with the company in various posts since the 1970s. The 61-year-old Reinhard is a retired board member, and Kreinberg is credited with turning around the company's plastics business.

On its face, they don't fit the profile of the striving executive. But that's a part of the challenges of the new LBO environment: What's in the best interest of the shareholders? And what's in the best interest of the executives that serve them?

A person within Dow, who declined to speak on the record, says the company was tipped off externally that its two executives were wheeling and dealing with private equity officials behind the board's back.