The backdating of
We would like to acknowledge the excellent research assistance from Ian Gow and Charles Wang in preparing this discussion.We also appreciate the comments of Alan Jagolinzer, Thomas Lys, and Hayagreeva Rao.Beyond such negative controlling measures, a more positive empowering approach based on ethics may also be necessary.What ethical measures need to be taken to address the agency problem?Fourth, we proceed to an analysis of good corporate governance practice involving backdating options based on a series of ethical standards including: (1) trustworthiness; (2) utilitarianism; (3) justice; and (4) Kantianism.We conclude that while executive compensation schemes (e.g., stock options) were originally intended to help remedy the agency problem by tying together the interests of the executives and shareholders, these schemes may have actually become “part of the problem,” and that the solution ultimately depends upon whether directors and executives accept that all of their actions must be based on a set of core ethical values.But as yet another executive who was once close to Jobs comes under the backdating cloud, one has to wonder: Is Jobs as innocent as Apple Inc. Or is the government afraid to go after one of the most respected leaders of American business? You can put him up there with Bill Gates and Warren Buffett," said Peter Henning, a professor who studies white-collar crime at Wayne State University in Detroit and one of the few legal scholars still paying attention to stock-options backdating.
Specifically, we discuss the decision models for executives engaged in backdating and the potential role of social networks among directors, selection considerations, institutional voting behavior, and how backdated options can be replicated with existing equity instruments.In other words, there seem to be an awful lot of people around Steve Jobs who have allegedly had problems linked to the backdating of stock options. Jobs is the prodigal son credited with saving Apple, which he co-founded in 1976 with Steve Wozniak, by turning a then-struggling Silicon Valley icon into a consumer-electronics powerhouse after his triumphant return in 1996.