Jenkins channels Manne
Today’s WSJ has a great article by Holman Jenkins on reporting on the backdating “scandal.”Â Larry is, of course, on the case.Â I would also — modestly — point out that much of whatÂ Jenkins says in his article today, IÂ said in this space about four months ago, when the news was first breaking.Â The key elements:
- The notion that backdating gives executives an incentive-defeatingÂ “paper profit right from the start”Â is asinine.
- “Backdating” may make perfect sense as a means of compensation, especially given certain regulatory quirks.
- If the practice amounts to corporate shenanigans,Â they sure didn’t bother toÂ hide it very well.
- Non disclosure of the practice, if disclosure was required, may, of course, be illegal.
- To quote Larry,Â “second-guessing executive compensation is a tricky business, even when the problems seem clear.”
On the somewhat-relatedÂ matter of spring-loaded options (the raising of which was not at all inappropriate, Elizabeth), I find myselfÂ in complete agreement with Larry.Â Strange, I know.Â But it ain’t misappropriation if the board knows what’s going on.Â Once again, perhaps some disclosure is required, but it’s hard to see how non-disclosure of the compensation scheme could transform informed executive compensation into a section 10(b) violation.
In both cases, I’m pretty sure there’s no “there” there, but I’m equally sure we’ll be reading (and litigating) about them for quite some time to come.