Funny thing happened last night while chatting with the COO of one of the major hedge funds, a group that has been much maligned lately for being shortys. For the umpteenth time in the last month or so it seems, someone assumed that my partner in our firm (actually my brother) was my husband.
And, so, I was reminded of the frequent competition between the two professions, usually healthy and respectful, but sometimes like the one between a bigger, bulkier brother and a smaller, still growing one. (Insert your own bias to see which I think is which…)
Now, I like lawyers.
As I enjoy these lunches, dinners, and late night conversations, I am collecting votes from some of the smartest guys and gals on the question posed by my new survey:
Which “trusted advisor” (to coin a David Maister phrase) was the one who told corporate executives that it was acceptable to backdate stock options, to ensure they were in the money and then not disclose the expense on a timely basis or at all? Who said it was ok to date the paperwork in the past to “paper” it all over and align all the lies intended to enrich a few?
I think it was the accountants, whom at that time were the trusted advisors, hanging in the C-suite not only as auditors but as consiglieres to management on all matters accounting, tax and systems implementation related.
Others think it was the lawyers, inside and out, who parsed the law looking for loopholes and exceptions, advised on the level and probability of enforcement, which at that time was minimal, and then left it up to management to make a decision which, in most cases, was fait accompli.
We’re reminded that breaking the law will still be disciplined , whether by Linda Thomsen and her gang or by the plaintiff’s bar. Links to a couple of recent cases are at the end of this post.
The Corporate Counsel.Net blog quotes a new study on executive pay on the reasons why , unfortunately, this is still the only way to make a lot of people do the right thing:
On pages 6-7 of the paper, there is this finding related to say on pay:
“Compulsion, through crisis or other acute events, is the foundation under most current US corporate initiatives to foster governance dialogues with institutional owners.
Evidence suggests that scandals over executive compensation – whether payouts for failure or backdating stock options – were key contributors in 2007 in motivating certain boards to increase their interaction with shareowners. Exercises in board dialogue on governance have generally not come about in the United States as a product of proactive, long-term strategic outreach by untroubled corporations. This reality has contributed to growing investor conviction that regular dialogue will not spread widely in the absence of compulsion, even where companies are troubled.”
UnitedHealth Settles Suits, Cuts 2008 Profit Forecast
UnitedHealth Group Inc. agreed to pay $912 million to settle two class-action lawsuits against the managed-care provider regarding its historical stock-options practices, as the company again lowered its 2008 profit target and projected second-quarter earnings below expectations.
BROADCOM FOUNDER PLANS GUILTY PLEA ON BACKDATING CHARGES
The Wall Street journal has suggested a 5 year probation and 12 million fine might be part of the deal Broadcom co-founder, Henry Samueli has struck with prosecutors. Federal cases are still pending against three other execs from the company in relation to stock option backdating irregularities.