If you are a registered user please log in to see more postings.
 

The AAO Weblog covers accounting issues and current events as they relate the practice of investment analysis. All posts prior to September, 2007 are in the public domain, but after September 4, 2007, only subscribers to The Analyst's Accounting Observer will see all posts going forward. Only selected, occasional posts will be released to the public domain from September 4 forward.

"Lucky Strikes"
Location: BlogsAAO Weblog (Public)    
Posted by: Jack Ciesielski 10/31/2006 7:38 AM
Spent the day yesterday at one of the best train stations in the country: Union Station, Washington DC. Why? The Arthur and Toni Rembe Rock Center for Corporate Governance, a joint effort of Stanford Law School, Stanford's Graduate School of Business and the Engineering School, held a conference entitled "Lucky Strikes: Public Policy Issues in Backdating and Springloading." Catchy, eh?

The conference featured speeches by SEC chairman Christopher Cox and enforcement director Linda Chatman Thomsen. No surprises in either speech, really. (Although it was the first time that I'd heard anyone trace the rise of options issuance back to the employee stock option plans of the 1980's when they were part of the anti-takeover landscape. That was an assertion of Ms. Thomsen.) More than just speeches by SEC staff, the conference was a feisty (well, to an accountant) blend of commentary and discussion from academics, members of the law profession, and other regulators like the PCAOB's Daniel Goelzer.

The conference covered more than I can cover in a single posting. After hearing about the problems that can be caused by even automatic grant plans and transactions in options during blackout periods (if the managers know that there's material information afoot, shouldn't they halt the auto-pilot transactions? Or depend on the auto-pilot as a defense?) and the varying length of blackout periods (there's little uniformity from company to company, and it's unclear why it should vary) and prepaid variable forwards (contracts that let executives get upfront cash from their option/stock holdings by pledging them for delivery in the future - without reporting a sale in the exec comp reporting regime), I'm more convinced than ever that most option plans inherently work against the long-term equity investor and no amount of regulation will change that.
Permalink |  Trackback