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Finding A Cure For The Compensation Blues

Harvey L. Pitt | August 29, 2006

As executive officers return from their summer vacations, many may be suffering from the “Compensation Blues.” No, this isn’t a new “love-gone-bad” heartache captured by Billy Holiday in a ballad you somehow missed. This is a real-life corporate heartache, as painful as any about which Lady Day sang, arising from the ever-widening stock option backdating scandal, and related developments.

The story of backdating stock option grant dates started out badly, but keeps getting even worse. What began as an academic observation about the statistically improbable “luck” of many senior executive officers when it came to stock option grant dates has become the latest “fraud du jour” for regulators, upwardly aspiring state attorneys general and plaintiffs’ lawyers. Approximately 100 companies are said to be facing SEC civil investigations, with many also facing companion criminal investigations.

At last count, 26 public companies have taken, or...

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