Backdating of options may be broader than suspected
The options backdating scandal brought down senior executives at companies all over America and even caused problems for firms as large as Apple (AAPL). The Wall Street Journal has exclusively obtained an unpublished survey that shows the problem is more widespread than previously believed. The paper writes that "The study identified 141 companies with such advantageous options-granting practices that the researchers concluded they were highly likely to have been involved in backdating. Ninety-two of those companies never were publicly linked to investigations or announced earnings restatements related to backdating." The research was done by University of Houston's C.T. Bauer College of Business.
The results could lead to another wave of investigations and perhaps indictments by the SEC and Justice Department. If the last set of investigations is any indication, a new series could go on for months and be played out in the newspapers. Companies being investigated may have to pay millions of dollars each in legal fees and boards of directors will probably have to hire outside counsel to help in investigations of senior executives. It will be "deja vue all over again," as Yogi Berra once said.The news means that the reputations of corporate America could be undermined again, at least in the eyes of shareholders and the public. The last backdating scandal caused many people to believe that greedy executives would quietly steal from shareholders by giving themselves options at well below market prices so that they could exercise those options for huge personal profits later.
The one thing that the survey results show, almost for certain, is that even though executives were caught in the last series of investigations, money grabbers will always take chances to make profits.
Douglas A. McIntyre is an editor at 24/7 Wall St.