Washington – Alarmed by the possible manipulation of stock options to enrich top executives at a growing number of companies, federal regulators are looking at refining their plan to expand public disclosure of compensation.
The list of public companies under investigation by the Securities and Exchange Commission or federal prosecutors regarding the suspicious timing of options grants has grown to at least 30, and executives at several companies have been fired in recent weeks.
“We’ve already learned that the problems are more than episodic,” SEC Chairman Christopher Cox told The Associated Press on Tuesday in response to questions. “The apparently widespread nature of the problems is of serious concern” to the agency.
In addition to investigating specific companies, the SEC also may respond to the options-dating controversy by revising the new pay-disclosure rules it proposed in January. Cox is expected to speak publicly on the matter today.
The scandal has prompted some corporate-governance and shareholder groups to press for revisions to the pay- disclosure proposal, which would require companies to disclose in far greater detail their executives’ pay and perks.
“By any reasonable standard, stock option backdating is unfair to shareholders who do not have the ability to retroactively purchase shares of stock at past market lows,” Richard Trumka, secretary-treasurer of the AFL-CIO, a major investor in public companies, wrote in a letter to the SEC on Wednesday.
At issue is whether executives manipulated option grants by backdating them to a point where the company’s stock was at or near a low point, boosting the value of those awards.
By choosing an earlier date when the stock was lower, the options are instantly worth the difference between the strike price and current price.
While stock options are used as an incentive for executives to boost a company’s performance and stock price, improper backdating can mean that executives reap big profits with no relation to their individual performance.
