August 16, 2006
Apologizing for Back Dating?
Holman W. Jenkins, Jr., of the Wall Street Journal, has written his second or third piece on why the back dating scandal is overblown. (How Backdating is like a 1980s Rockumentary) As I understand his argument it goes like this. Company can legally grant "in the money options" to executives. They did so but mislabeled them "at the money options" so as to work around an "absurd, even imbecilic" accounting rule. Don't like a bad rule, violations are acceptable. I had a race car mechanic use the same argument last night to justify cheating on "idiotic" rules designed to make race cars in one class equal. The argument is, of course, self-serving and also dangerous -- it attacks the system that makes everything work. If everyone does it, no rule is respected, there is no system. People who make the argument are free riders; they free ride on those who voluntarily respect the rules and keep the system in place so they have a place to make money by cheating.
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Agreed. I have a comment over at Ideoblog with a bit more detail about why these disclosure rules may have been adopted in the first place.
Posted by: Michael Guttentag | Aug 19, 2006 8:05:15 AM