|
Reader's Favorites
Media Casualties Mount Administration Split On Europe Invasion Administration In Crisis Over Burgeoning Quagmire Congress Concerned About Diversion From War On Japan Pot, Kettle On Line Two... Allies Seize Paris The Natural Gore Book Sales Tank, Supporters Claim Unfair Tactics Satan Files Lack Of Defamation Suit Why This Blog Bores People With Space Stuff A New Beginning My Hit Parade
Instapundit (Glenn Reynolds) Tim Blair James Lileks Bleats Virginia Postrel Kausfiles Winds Of Change (Joe Katzman) Little Green Footballs (Charles Johnson) Samizdata Eject Eject Eject (Bill Whittle) Space Alan Boyle (MSNBC) Space Politics (Jeff Foust) Space Transport News (Clark Lindsey) NASA Watch NASA Space Flight Hobby Space A Voyage To Arcturus (Jay Manifold) Dispatches From The Final Frontier (Michael Belfiore) Personal Spaceflight (Jeff Foust) Mars Blog The Flame Trench (Florida Today) Space Cynic Rocket Forge (Michael Mealing) COTS Watch (Michael Mealing) Curmudgeon's Corner (Mark Whittington) Selenian Boondocks Tales of the Heliosphere Out Of The Cradle Space For Commerce (Brian Dunbar) True Anomaly Kevin Parkin The Speculist (Phil Bowermaster) Spacecraft (Chris Hall) Space Pragmatism (Dan Schrimpsher) Eternal Golden Braid (Fred Kiesche) Carried Away (Dan Schmelzer) Laughing Wolf (C. Blake Powers) Chair Force Engineer (Air Force Procurement) Spacearium Saturn Follies JesusPhreaks (Scott Bell) Science
Nanobot (Howard Lovy) Lagniappe (Derek Lowe) Geek Press (Paul Hsieh) Gene Expression Carl Zimmer Redwood Dragon (Dave Trowbridge) Charles Murtaugh Turned Up To Eleven (Paul Orwin) Cowlix (Wes Cowley) Quark Soup (Dave Appell) Economics/Finance
Assymetrical Information (Jane Galt and Mindles H. Dreck) Marginal Revolution (Tyler Cowen et al) Man Without Qualities (Robert Musil) Knowledge Problem (Lynne Kiesling) Journoblogs The Ombudsgod Cut On The Bias (Susanna Cornett) Joanne Jacobs The Funny Pages
Cox & Forkum Day By Day Iowahawk Happy Fun Pundit Jim Treacher IMAO The Onion Amish Tech Support (Lawrence Simon) Scrapple Face (Scott Ott) Regular Reading
Quasipundit (Adragna & Vehrs) England's Sword (Iain Murray) Daily Pundit (Bill Quick) Pejman Pundit Daimnation! (Damian Penny) Aspara Girl Flit Z+ Blog (Andrew Zolli) Matt Welch Ken Layne The Kolkata Libertarian Midwest Conservative Journal Protein Wisdom (Jeff Goldstein et al) Dean's World (Dean Esmay) Yippee-Ki-Yay (Kevin McGehee) Vodka Pundit Richard Bennett Spleenville (Andrea Harris) Random Jottings (John Weidner) Natalie Solent On the Third Hand (Kathy Kinsley, Bellicose Woman) Patrick Ruffini Inappropriate Response (Moira Breen) Jerry Pournelle Other Worthy Weblogs
Ain't No Bad Dude (Brian Linse) Airstrip One A libertarian reads the papers Andrew Olmsted Anna Franco Review Ben Kepple's Daily Rant Bjorn Staerk Bitter Girl Catallaxy Files Dawson.com Dodgeblog Dropscan (Shiloh Bucher) End the War on Freedom Fevered Rants Fredrik Norman Heretical Ideas Ideas etc Insolvent Republic of Blogistan James Reuben Haney Libertarian Rant Matthew Edgar Mind over what matters Muslimpundit Page Fault Interrupt Photodude Privacy Digest Quare Rantburg Recovering Liberal Sand In The Gears(Anthony Woodlief) Sgt. Stryker The Blogs of War The Fly Bottle The Illuminated Donkey Unqualified Offerings What she really thinks Where HipHop & Libertarianism Meet Zem : blog Space Policy Links
Space Future The Space Review The Space Show Space Frontier Foundation Space Policy Digest BBS AWOL
USS Clueless (Steven Den Beste) Media Minder Unremitting Verse (Will Warren) World View (Brink Lindsay) The Last Page More Than Zero (Andrew Hofer) Pathetic Earthlings (Andrew Lloyd) Spaceship Summer (Derek Lyons) The New Space Age (Rob Wilson) Rocketman (Mark Oakley) Mazoo Site designed by Powered by Movable Type |
Backdating The WSJ has an article today on backdating: Brocade Communication Systems Inc. agreed to pay a $7 million penalty to settle ... the backdating scandal, according to people familiar with the matter.... Brocade first struck a deal to pay $7 million in March 2006, but the settlement was held up as the number of companies under investigation for backdating options expanded to more than 100.... There was not necessarily fraud on the shareholder because it's in a shareholder's interest to use backdated options to pay executives. They don't have to use as many of them because they are intrinsically worth more (H. Jenkins), but are also not taxed as highly as more regular dated ones where the date wasn't coincidentally the lowest price of the quarter. Putting that aside, fines in general should not be paid by the damaged party, but should be paid as a deterrent--and as compensation! How about the following proposal: the company pays the fine to the shareholders of record on the day before the news that false accounts were filed. That way the ongoing shareholders aren't hurt and the shareholders that sold after the bad news came out and the stock tanked will be compensated by the new ones who bought after the news. Just like how shareholders are treated when a company goes ex dividend. Here's another controversial idea to increase deterrence: don't prosecute companies for common practices until you've given them sufficient warning to change their ways. Otherwise the prosecutors are doing what Dr. Strangelove accused the Russians of doing: [T]he... whole point of the doomsday machine... is lost... if you keep it a secret! Why didn't you tell the world, eh? The Constitution guarantees no ex poste facto laws in Article I, Section 9, but we are still working on no ex poste facto judicially implemented regulation. Who watches the watchmen? Do we need four independent judiciaries with each one's scope determined by the others like the four redundant computers on the space shuttle? No need to curb the SEC and prosecutors of public companies--the companies are helping themselves. By going private. Posted by Sam Dinkin at May 31, 2007 12:06 PMTrackBack URL for this entry:
http://www.transterrestrial.com/mt-diagnostics.cgi/7623 Listed below are links to weblogs that reference this post from Transterrestrial Musings.
Comments
arguing in favor of fraud is a losing proposition. Posted by anonymous at May 31, 2007 12:20 PMBut it is quite arguable whether the backdating was even fraud. It's tax evasion, almost certainly, but I would argue against backdating stock options being called fraud, since no one was deceived, and deception is a key element in fraud. Also, you neglected the major point that Rand was making, which is that ex post facto laws by judicial fiat are just as damaging as ex post facto laws by legislative fiat. let me know how many documents you backdate? Backdating is a material misrepresentation, it says an Is it okay if i sell you backdated pharmaceuticals?
it says something that simberg endorses fraud. Yes, it says that you don't know how to read, since I didn't even write the post, Anonymous Moron. Posted by Rand Simberg at May 31, 2007 02:31 PMBackdating stock options is not illegal. Backdating and failing to report to shareholders or expense them properly is illegal. Personally, I think that if the options were issued improperly then the issuee should pay, to the shareholders of record, the difference between what they were worth on the backdate and what they were worth on the date of actual issuance. That's if the options were actually exercised. If they weren't exercised then just re-date them. I think compensation committees and accounting departments who knowingly and willingly fail to report the backdating in the proper manner should face criminal charges. Posted by Jardinero1 at May 31, 2007 03:00 PMGiven that Simberg controls this site, and is willing to as for all those in favor of backdating? Insurance policies? No, Anonymous Moron. I've never deleted a post simply because I "disagree" with it. I've never deleted anyone's posts except yours, and (other) spam. And I haven't been doing proper hygiene, since I've been allowing your posts to stay up, despite the fact that you remain a moronic and abusive troll. Posted by Rand Simberg at May 31, 2007 03:23 PMI don't understand how these executives thought that they could get away with something like that. The IRS is notorious for closing loopholes after enough fish have entered the net. Delete him! Posted by Mike Puckett at May 31, 2007 04:06 PMInsurance policies are routinely backdated. Posted by Jardinero1 at May 31, 2007 07:54 PMIf the shareholders and the executives colluded, they would pick the lowest price date of the quarter, but reduce the number of shares. That way, the executives pay lower taxes. Since all firms did the backdating, there wasn't any relative distortion of earnings--they were all distorted roughly the same. Some of the backdating came before options had to be expensed at all! If an enforcement regime is common practice, there's no deterrence from changing it and not telling anyone. It's like deciding one day that when the speed limit sign says 60, you don't get a ticket driving 66, but 61. Then taking the license plate of every car driving 61, then telling them about the new enforcement regime in the same letter you send them the speeding ticket! It may be illegal, but the deterrence doesn't start until after they get the letter. Posted by Sam Dinkin at May 31, 2007 08:46 PMJardinero1: Surely if the executives and the compensation committees couldn't backdate, they would issue more options. This would make the price systematically higher which would mean that compensation packages would have to include more restricted stock and more cash to have the same level of risk and salience to the executive. Those forms of compensation are taxed at the income rate. Should the perpetrators be blasted for the total amount of mis-stating to the shareholders (which if the shareholders knew in advance would agree to) or just for tax fraud? Perhaps we should start applying the same fraud standards to the federal budget numbers. Everyone wants to believe that things are better than they are. Who's harmed if the 10-year deficit figures are always $100 billion low? It's like the ancient Chinese proverb: Don't burn down your house to annoy your mother in law. Posted by Sam Dinkin at May 31, 2007 09:02 PMSam: I am not sure I follow you. I don't have a problem with backdating. I have a problem with compensation committees and accounting departments who don't report or expense them properly. Punitive measures are sometimes required to insure that the keepers of the books are kept honest. I didn't address the personal income tax complexities of backdated options. Posted by Jardinero1 at June 1, 2007 10:08 AMThe answer to your question, Sam, is provided by your quote: "The Attorney General loves surprises!" Posted by Sigivald at June 1, 2007 10:21 AMSam Colour it how you wish, backdating is fraud. It's pretending one thing is another. If the compensation isn't adequate, pay more upfront To backdate is to claim risk that was never taken. Can I backdate an insurance policy and check Post a comment |