Now comes the tale of companies backdating stock options. That is, they grant executives an option today but at yesterday's lower price. Not a bad deal for the executives as they are guaranteed to make money. But a bad deal for the stockholders.
Options are supposed to be designed as an incentive. You help the company do well, so the stock goes up and your options are worth more. You help the company do poorly, the stock goes down and your options are worth less. A reasonable deal.
But it's not the way the world works at some companies, Mercury Interactive being one such company. Their CEO and CFO have both left and the company is restating its financial results going back to 2002, all the result of their use of the backdating of options. Other companies are being investigated by the SEC.
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