How The Backdating Virus Spread
from the memetracking dept
With so many options backdating stories coming to light, one might be tempted to ask how all of these different companies all came upon the same scheme at around the same time. A new study cites as one of the causal factors, a high level of inbreeding among corporate boards. In other words, of the companies that have been implicated in the scandal, many of them have shared board members with each other, suggesting that the idea to backdate options as a compensation mechanism may have spread via word of mouth from company to company. Companies like to get impressive names on their boards, people who are executives and directors elsewhere. But if the study is true, then this would seem to come at a cost. Of course, there could be a more benign explanation: a lot of the companies involved are in tech, so it makes sense that there would be many shared directors among them. Still, the idea that a rotten apple, so to speak, could cause problems at multiple companies isn't hard to believe. Investment Dealers' Digest has an interesting report on one director who serves on the boards of three companies, each of which is now drawing the wrath of corporate governance experts. What's funny is that those have sought to reform boardrooms have pushed hard for the inclusion of more independent, outside directors on company boards. This sounds nice, but if it means those directors are importing bad ideas from other companies, it really can backfire.