Saturday, July 29, 2006

SEC increases executive compensation reporting

Mercury News reports that:

The U.S. Securities and Exchange Commission, taking action to end executive-pay abuses that triggered the biggest investigation of corporate wrongdoing in at least three years, said companies will have to disclose the timing and price of stock-option awards

In the controversy over the timing of options awards to executives, at least 60 public companies have disclosed that their options practices are being investigated by the SEC or the Justice Department or both. The SEC itself says it has at least 80 companies under scrutiny.

At issue in many of the investigations is a practice known as backdating, in which stock options are issued retroactively to coincide with low points in a company's share price -- a move that can fatten profits for options recipients when they sell their shares at higher market prices.

Backdating options can be legal so long as the practice is properly disclosed to shareholders and approved by the company's board, experts say. The SEC rules on disclosure of executive compensation include new requirements for companies regarding disclosure of options dating.
Rambus Inc. 2001 proxy at page 16:

The 1999 Stock Plan permits the Board of Directors or the Committee to grant stock options to employees on such terms as the Board or the Committee may determine. The Committee has authority to grant and administer stock options to all employees of the Company. (Rambus 2001 proxy at page 16.)

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