Thursday, May 10, 2007
Silicon Valley company Marvell Technologies Group determined that there was significant backdating of stock options granted to executives, and its CFO and chief operating officers resigned, although the COO is allowed to stay on in a lesser management role. The general counsel of the U.S. subsidiary was terminated earlier, although it is not clear whether he participated in the backdating or whether the firing was due to other conduct at the company, perhaps during the internal investigation. Marvell's CEO, Dr. Sehat Sutardja, dodged the primary bullet and gets to keep his executive position but steps down as chairman of the board, although he gets to remain a director. The company's press release (here) states:
As previously announced, the Board of Directors concluded on October 2, 2006 that the actual measurement dates for financial accounting purposes of numerous stock option grants issued in the past differ from the recorded grant dates of such awards. The Special Committee has determined that there were numerous instances in which grant dates were chosen with the benefit of hindsight as to the price of the Company’s stock, so as to provide exercise prices lower than the fair market value on the actual measurement date. In addition, the Special Committee found a systemic failure of internal controls with respect to the stock option process and related matters, as well as a failure by certain members of current and former management to exercise sufficient oversight over the stock option process, resulting in inaccuracies in the Company’s books and records, financial statements, and public filings. The Special Committee reported that several current and former members of management, including the previously terminated General Counsel of its U.S. operating subsidiary and the recently resigned Chief Financial Officer and Chief Operating Officer, bear varying degrees of responsibility for these deficiencies.
The Special Committee found that the Company’s Chief Executive Officer participated in only a few instances in grants with incorrect measurement dates. The Special Committee recommended that Dr. Sehat Sutardja remain as Chief Executive Officer and as a member of the Board of Directors, but step down as Chairman of the Board in favor of a non-executive Chairman of the Board. The board’s Governance Committee is commencing a search for three new independent directors to fill existing vacancies. One of these independent directors will succeed Dr. Sutardja as Chairman of the Board. Dr. Sutardja, upon such event, will remain a director and continue as the Company’s President and Chief Executive Officer. [Italics added]
This sounds a little bit like the "Steve Jobs Treatment" at Apple -- the CEO (who happens to be a company founder) was involved in the backdating, but just a little bit and he really shouldn't be held responsible. Kind of like a mulligan for you golfers out there. (ph)