RE: Option Backdating
I think the Canadian penal system may be more efficient than ours in this context. Consider the lenient treatment that Steve Jobs has received in comparison to what happened at MXIM, where virtually the entire Board of Directors was forced to resign. I think it's obvious that Jobs has been treated with kid gloves, for fear of public backlash. But it's unfair AND inefficient. The best disincentive would be a sufficiently large fine (not covered by D&O liability insurance, of course)
but without leading to termination, which in certain cases [Jobs/Apple] is just too steep a price to pay.
Anyway here's the article:
RIM Officers Pay Big Fine Over Options [WSJ]
By STUART WEINBERG
TORONTO-- Research In Motion Ltd.'s co-CEOs and other executives have agreed to pay nearly $75 million to settle charges tied to their role in stock-option backdating at the BlackBerry maker.
The settlement, which was approved by an Ontario Securities Commission panel, calls for co-CEOs Jim Balsillie and Mike Lazaridis and two other executives to pay a fine totaling 38.3 million Canadian dollars ($31 million) due to the benefits they received for improper option grants.
The executives also have to pay a total of C$44.8 million to defray the costs of RIM's internal investigation. However, the co-chief executives have already each paid C$7.5 million each, toward that amount. The will also pay C$9.1 million administrative penalty towards the cost of Canadian regulators' investigation.
The penalty is the largest ever paid by individuals to the OSC. Previously, the largest individual payment was made by former Laidlaw chief executive Michael DeGroote, who paid C$23 million in 1993 to settle allegations of illegal insider trading, according to the Globe and Mail newspaper.
The settlement also involves relatively smaller fines against several other RIM executives and directors. The OSC also formally reprimanded all individuals in the case. RIM can't indemnify the executives against the costs involved.
John Richardson, RIM's lead director said, "RIM is pleased that the parties have resolved matters with the OSC and looks forward to resolving matters with the SEC."
RIM said the company and the executives involved have also made settlement offers to the U.S. Securities & Exchange Commission, which SEC staff have recommended the agency approve.
The backdating at RIM occurred over a 10-year period between December 1996 and July 2006, according to an OSC statement of allegations. During that time, about 1,400 of 3,200 stock-option grants made by RIM were made using incorrect dating practices.
"The grant dates selected resulted in more favorable pricing for the options or 'in the money' grants," the OSC said. "In many instances, the lowest share price in a period was chosen using hindsight in order to set the grant date and, therefore, the exercise price."
Stock options allow recipients to buy stock in the future at a set exercise price, generally the market price on the day the options were granted. Backdating involves pretending that a stock option was granted on an earlier date when the market price was lower, conveying an opportunity for extra profit.
The total in-the-money benefit resulting from the incorrect dating practices for all RIM employees was about C$66 million, the OSC said in the statement of allegations. Of that amount, C$33 million hasn't been reimbursed or repaid to RIM or otherwise forfeited, it said.
RIM's backdating problems became public in September 2006 when the company disclosed a voluntary review of its stock-option-granting practices. It said at the time that it had informed the OSC and the U.S. Securities and Exchange Commission of its review. Both regulators subsequently opened investigations into RIM's option-granting practices, and in April 2007, RIM disclosed that the U.S. Attorney for the Southern District of New York was also reviewing RIM's stock-option grants.
In March 2007, RIM completed its internal review, finding that backdating did occur, but that there was no intentional misconduct. As a result of its findings, Mr. Balsillie was required to relinquish his role as RIM's chairman. |
