Stock Option Scandal Shows Crime Doesn't Pay

Lora Bentley

Executive pay has reached levels that some would call obscene. In a recent CNBC interview, even President George W. Bush called pay packages "out of hand." He indicated that though incentives are a good idea, they should be rationally tied to performance.


Of course, such incentives also should be given and accepted via legal processes. But maybe that's not as obvious as we think it should be.


As reported on this morning, research by Glass Lewis found that at least 152 companies across the country have begun internal reviews or are being investigated by federal agencies for improper stock option practices. Specifically, inconsistencies in financial filings required under Sarbanes-Oxley indicate that companies were backdating stock option grants so the stock would be of greater value to its recipients.


Glass Lewis also found that backdating cost the companies involved nearly $10.3 billion -- that's $5.1 billion in lost market value and $5.2 billion in pre-tax compensation costs.

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