Based on an article in today's WSJ, I'd nominate Brocade Communications Systems as a company that exemplifies the theory of maximizing potential stock option value no matter what. If the stock has gone up recently and looks like it will continue rising, back date the options. If the stock has tanked and it looks like the holder will not make money, change the exercise date of the option to sometime in the future. If things got really bad, just issue new offer letters - changing all the relevant dates - although people were already employees.
In the Internet stock boom of the 1990s when Brocade did not have much cash but it had a rising stock they used options to help them recruit good people. So, they would grant options before you had joined the firm; in some cases you would be up 10% by the time you joined. Once they were made aware that this practice was not quite kosher, they offered part-time 'jobs' to those who would be joining the company over the next few weeks. It's doubtful that these new recruits could get much done in the four hours of work a week they were hired for. All these options were approved by the stock option committee, which consisted of one person - the CEO.
The company did finally have an internal probe of its stock option policies when a former employee threatened to go to the SEC. This review resulted in a restatement of net income for 2000; it went from a profit of $67,900,000 to a loss of $951,200,000. That's a difference of one billion dollars.
Update:
The CEO and VP of Human Resources have been charged both civilly and criminally. These are the first such charges by the Feds in this type of stock option matters
No comments:
Post a Comment