Options Backdating Scandal Trickles Down to the HR Department
Recently, there's been lots of coverage on the stock option backdating scandals that have swept the corporate world and are now resulting in criminal indictments as discussed by WSJ Law Blog and Larry Ribstein's Ideoblog. But it's not just company CEOs and financial officers facing criminal prosecution for backdating; as Employers Lawyer Michael Fox writes, human-resources officers also face indictment.
The reason that HRs are getting noticed by prosecutors? As Fox explains, in contrast to other corporate, Enron-like scandals that focus on accounting, human-resource departments often play a major role in administration of stock options. In the Brocade indictment, the company's CEO, Gregory Reyes, had sole authority to grant stock options, and along with Stephanie Jensen, vice president and head of HR, the company had a practice of waiting until the end of a fiscal quarter
before granting options at the lowest price for that quarter.
Fox isn't sure how the criminal case will proceed, so he concludes his post this way:
HR is often called on to be the conscience of a company. Time may soon tell how well that mission has been accomplished.
In the meantime, Fox's post should serve as notice to HR departments to review your involvement in administration of stock option programs.
Posted by Carolyn Elefant on July 24, 2006 at 06:05 PM | Permalink
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