Thursday, July 20, 2006

Everything You Wanted to Know About Options Backdating

Go read . There has been a lot of great blogging about options backdating (scroll down to July 18), and of course, reportage in The Wall Street Journal, but this blog is obsessed with the subject and has really gathered all the information in one place. Well worth reading if you, like me, have a masochistic interest in the subject.

I am amazed that shareholders aren't more up in arms about it. Options are meant to be rewards for successful leadership (as reflected in increasing share price). When you rig it so that the option is automatically in the money, it's a fraud commited against shareholders--and ultimately theft of their money.



Anonymous Mukund Mohan said...


Here are some reasons we have heard from several experts on why the issues of backdating have not yet hit main stream.

1. Everybody did it: Certainly seems so, given 67 companies now are under the options backdating cloud.

2. "I know someone that did it and they are really honest and nice people that wont do this": Its based on the fact that people that were close to these executives that either a) were fired or b) resigned were real people who were genuinely nice.

3. "There is no big company gone down like Enron yet": We think this is a possibility but not a huge reason.

4. It will be a one time hit and then its behind them: Most analysts (financial) seem to think that the issues are going to be a one time hit in the earnings and then business as usual.

5. They work at these companies: Most employees who also benefitted from stock options are still working at these companies. Bite the hand that feeds - not sure its a good idea.

6. "Its still a Silicon Valley thing": Although Michaels Stores, United Health and Home Depot have all be involved, most of the 60+ companies are still largely in the Valley and are mostly high tech.

Given all these possibilities, no wonder the average person still a) does not care and b) is not too concerned with options backdating.


10:26 PM  

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