Thursday, October 12, 2006

The CEOs Start to Bite the Dust Over Options-Timing Problems

As the internal investigations into options-timing practices at various companies start to come to fruition, more CEOs are starting to leave their position over questionable practices.  Computer security company McAfee, Inc. earlier announced that its general counsel had been relieved of his position, and now the company disclosed that its CEO, George Samenuk, has retired, and its president, Kevin Weiss, has been terminated after a special committee reported its conclusions regarding the timing of options grants to corporate officers.   According to McAfee's 8-K (here), "Following the substantial completion of the Special Committee’s previously announced internal review of McAfee’s stock option grant practices, conducted with the assistance of independent counsel and forensic accountants, McAfee has determined that it will need to restate historical financial statements to record additional non-cash charges for stock-based compensation expense over a ten year period. Based on that preliminary review, McAfee announced that it currently believes that the amount of the restatement required to record such charges is likely to be in the range of $100 to 150 million."

Internet media company CNet Networks Inc. announced that its CEO and co-founder, Shelby Bonnie, has resigned as CEO.  According to a company press release (here), the "key findings" of its special committee investigating options issuances practices are:

There were deficiencies with the process by which options were granted at CNET, including in some instances the backdating of option grants, during the period from the Company’s IPO in 1996 through at least 2003.  These deficiencies resulted in accounting errors, which the Company has previously announced will result in a restatement. A number of executives of the Company, including the former CFO and the recently resigned CEO, General Counsel and SVP of Human Resources, bear varying degrees of responsibility for these deficiencies. The report does not conclude that any current employees of the Company or any recently resigned employees engaged in intentional wrongdoing.

    Bonnie will remain on the board, although that will probably be for only a short time.  Having quoted Freddie Mercury's lyrics once before on this subject (see earlier post here), it's time to bring out Another One Bites the Dust again:

    How do you think I'm going to get along
    Without you when you're gone
    You took me for everything that I had
    And kicked me out on my own
    Are you happy ? Are you satisfied ?
    How long can you stand the heat

    Time wil tell whether more CEOs join the exodus over options-timing problems.

    http://lawprofessors.typepad.com/whitecollarcrime_blog/2006/10/the_ceos_start_.html

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