The historical significance of this week's stock market plunge should not be under-estimated. When it comes to risk, it's a whole new ball game with global capital markets now more integrated than ever before. What’s happening now in China is the shape of things to come.
First there was news that the President’s kid brother Marvin was involved in stock option backdating. Now we have word that his uncle, William H.T. "Bucky" Bush, was one of the outside directors at a company who made about $6 million in unauthorised pay from an options backdating scheme
Call it the six degrees of separation theory of corporate governance. A study has found that study has found that the probability that a company would start backdating stock options study rose by up a half if 0ne 0f its directors was also on the board of a company already backdating options.
Apple has formally exonerated Steve Jobs of any wrongdoing over the options backdating scandal. But Apple's 10K report to the Securities and Exchange Commission raises more questions than answers about this sordid affair.
Why all the fuss about the expensing of options? Nothing to do with accounting or the health of companies. Bosses and directors don’t want the general public to understand the ever increasing gap between the wages of the average American worker and the average corporate CEO.
So you think backdating stock options is legit? Check a new study which has found that hundreds of US company bosses inflated their pay by as much as 10 per cent by secretly backdating share options. The study estimates that 12 per cent of firms used manipulation to provide “lucky grants” of options at the lowest price of the month.
The Securities and Exchange Commission is now examining whether directors who sit on more than one company board may have spread the practice of backdating stock-option grants with research showing that 40 per cent of the companies under scrutiny have common directors. This is all part of the “six degrees of separation” theory of corporate governance.
