|  | | 2006 News and Press Releases | | |
HEADLINE NEWS:
How To Clean Up a Scandal: ACS And Several Other Companies Caught In The Options Backdating Scandal
Staff Writer - Business Week Online
Securities Mosaic. November 28, 2006
_________________________________________________________________________
EXCERPT: ACS [Affiliated Computer Services] is one of several companies that are now demonstrating how executives and boards caught up in the scandal can rebuild their reputations with customers, employees, and investors. Others include KB Home (KBH), Shaw Group (SGR), and Mercury Interactive, which has been acquired by Hewlett-Packard (HPQ). Launching an internal probe is a necessary first step, if there's any suspicion of wrongdoing. "You want to do that before the [Securities & Exchange Commission] begins an inquiry," says Paul Hodgson, a senior research associate at the Corporate Library, which does research on governance and compensation issues. If any problems are uncovered, it's important to address them with the utmost speed. "You want to restate your financials quickly," says Lie. "You want to pay any additional taxes quickly." Showing Executives the Door Initially, ACS moved slowly in its probe. In May, the company made a filing with the SEC that said, "ACS does not believe that any director or officer of the company has engaged in the intentional backdating of stock option grants in order to achieve a more advantageous exercise price." It was only six months later that ACS took the step of pushing out two of its top executives. Such a move can be difficult, especially if it's an executive who has been integral to the company's success. But it may be necessary to reassure outsiders. "The blueprint that we're seeing is, first and foremost, if someone broke the law and knew they broke they law, they have to go," says Patrick McGurn, executive vice-president at Institutional Shareholder Services, which advises institutional shareholders on governance and proxy issues. … Standardizing Options Grants McGurn of ISS says there are important steps that companies can take, even after removing executives involved in backdating and restating financials. Companies can attempt to reclaim for their shareholders financial gains that top executives reaped from backdating options or move to reprice options that have been issued. McGurn adds that companies can also institutionalize certain practices to make sure backdating doesn't happen again. For example, all options can be granted at the same time every year or every quarter. |
|
|
