Option backdating board interlocks
Recently, the SEC provided guidance concerning how companies should account for and disclose any stock option errors.
Porter Wright's attorneys have been providing counsel to companies, boards of directors, and individuals on the internal evaluation of stock option and other equity compensation practices, as well as other corporate governance and compliance matters.
In view of recent actions and widening of regulatory investigations, we believe that it would be prudent for companies to review controls and procedures relating to stock option and other equity compensation grants and corporate governance guidelines on a regular basis.
In the attached Client Alert, we summarize the recent SEC guidance concerning the accounting for stock options and disclosure of stock option errors.
, which was recently made publicly available on SSRN, my co-authors (Yonca Ertimur of Duke University and David Maber of the University of Southern California), and I examine whether directors are held accountable for poor monitoring of executive compensation. "Firm Linkages to Scandals via Directors and Professional Service Firms: Insights from the Backdating Scandal," Journal of Business Ethics, Springer, vol. Matthias Kiefer & Edward Jones & Andrew Adams, 2016. "Shared auditors in mergers and acquisitions," Journal of Accounting and Economics, Elsevier, vol. "The power of the pen reconsidered: The media, CEO human capital, and corporate governance," Journal of Banking & Finance, Elsevier, vol. We examine the role of board connections in explaining how the controversial practice of backdating employee stock options spread to a large number of firms across a wide range of industries.
The increase in the likelihood that a firm begins to backdate stock options that can be explained by having a board member who is interlocked to a previously identified backdating firm is approximately one-third of the unconditional probability of backdating in our sample. "Director Histories and the Pattern of Acquisitions," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. "The Impact of Board Internationalization on Earnings Management," Working Paper Series 1096, Research Institute of Industrial Economics. "Through the Grapevine: Network Effects on the Design of Executive Compensation Contracts," Harvard Business School Working Papers 16-019, Harvard Business School, revised Dec 2016. Ertimur, Yonca & Ferri, Fabrizio & Maber, David A., 2012. "What drives firms' decisions to lobby and determinants of their lobbying positions: Evidence from firms' comment letter submissions during FASB's stock option expensing proposal in 2004," The International Journal of Accounting, Elsevier, vol.