...Is stock option backdating ethically defensible? Background Stock options are widely used to supplement the amount of non-performance-based cash compensation for executives and CEOs. Furthermore, Bishara & Schipani state that stock options, “have long been touted as a way to align the interests of the executive with the shareholder…”(2008, p. 13) and thus provide, “greater incentives for executives to improve firm performance.” (Raiborn et al. 2007, p.1) However, due to the transactional nature of options that they can be cashed in there exists motivation for executives or firms to manipulate the price so as to receive the greatest gain. Prior to 2002, a company was not required to, “report the issuance of stock options until after the close of the fiscal year.” (Raiborn et al. 2007 p.3 ) As such many firms decided to retroactively increase the value of their share options, particularly executives options. However, by 2002, the time the control measure, Section 403 of the Sarbanes-Oxley act, was passed, 1 out of every 5 companies were suspected to still utilise the practice. Widespread backdating caused a media stir in 2006, with prominent companies such as Comverse and UnitedHealth being indicted. This caused a ripple through the business community as other organisation came under investigation. In 2006, 173 companies were purported to have retroactively altered the stock options of prominent members of their organisations. Retroactively dating options is defined as...
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...Comverse Technology Inc Backdating Stock Options – Overstating of Net Income Comverse Technology Inc is a provider of software and systems enabling net-work based multimedia communications services. It is a publicly traded corporation on the S&P 500 and NASDAQ-100. It was founded in 1984 and publicly traded since 1986; Comverse Technology Inc is based in New York. Comverse Technology has 5 subsidiary companies. They are Comverse, Verint, Ulticom, Startel, and Starhome. Each subsidiary is a provider of communication services. Comverse Technology Inc’s Board includes a majority of independent directors. The Board has four standing committees: Audit Committee, Compensation Committee, Corporate Governance and Nominating Committee, and Executive Committee. Three former Comverse executives were charged August 9/2006 for creating secret slush funds and backdating stock options causing Comverse to publicly file false financial reports, deliberately misstating earnings. The scheme took place from 2001 through to 2005. The former CEO Jacob ‘Kobi’ Alexander, former CFO David Kreinberg, and former General Counsel William F. Sorin manipulated millions of stock options by backdating them to when stock prices were at low point. As part of the scheme executives made material misrepresentation to shareholders regarding stock option grants and concealed the compensation expense, thus overstating its net income and earnings per share. By using hind-sight 20-20 they were able to...
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...Business division. Qwest Communications International Inc. The company was also involved in accounting scandals, and was fined $250 million by the U.S. Securities and Exchange Commission (SEC), to be split into two $125 million payments due to the poor state of Qwest's current financial health. Among the transactions in question were a series of deals from 1999 to 2001 with Enron's broadband division which may have helped Enron conceal losses. In 2005, former Chairman and chief executive officer (CEO) Joseph Nacchio, former President and chief operating officer (COO) Afshin Mohebbi and seven other former Qwest employees were accused of fraud in a civil lawsuit filed by the SEC. Separately, Nacchio was convicted of 19 counts of insider trading in Qwest stock on April 19, 2007. On March 31, 2011 US Federal Judge Marcia Krieger issued a summary judgement rejecting all SEC's claims against Afshin Mohebbi and ruling in his favor. Adelphia Communications Corp. Pennsylvania-based Adelphia Communications ranked as the fifth largest cable company in the country before internal corruption and a $2.3 billion debt led to its 2002 bankruptcy. The Adelphia founders were charged with securities violations. Five officers were...
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...Experiential Exercise: For this exercise, I chose to compare the websites of Boeing and Lockheed Martin. Two prominent companies in the aerospace and aviation industry, which is, and will most likely always be, the primary industry I'm employed in. Both companies' websites successfully convey information in a simplified and descriptive manner. With Lockheed Martin, there are navigational links for different levels of employment and experience levels, such as ex-military personnel transitioning into the civilian careers, new college graduates, interns, and experienced professionals. This simplifies the job search into a 'one-click' method in which interested applicants can view the opportunities that are available to their respective experience levels, as well as any further instructions for applying. Boeing, while also having links to different employment levels, seems more focused on communicating information about the company's ethics, history, and products. This field is based on staying on top of new technology and producing goods of exceptional quality, which means there is a . However, at some levels of both companies, there is a cost-leadership strategy in producing goods for the lowest cost and having employees more efficient than the other. Therefore, it appears that both companies are using a combination strategy, and doing so successfully. There seems to be an encouraged strong desire for entry level applicants with both companies, however, there...
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...Questions: 1. Why do companies use stock options to compensate employees? What are the advantages of stock options relative to cash compensation? What, if any, are their disadvantages? 2. What, if any, risks do Dell’s shareholders face from Dell’s stock option program? Draw terminal payoff diagrams to illustrate the risk. Is this risk something that shareholders of Dell expect to bear when investing in Dell? 3. How does Dell remove, or hedge, the perceived risk of the stock options program for shareholders? Draw terminal payoff diagrams to illustrate. 4. Why does Dell transact in both call and put options? Use put-call parity to reformulate the put and call positions that Dell takes in terms of Dell’s stock and borrowing. What effectively does Dell’s call and put positions accomplish? Is risk management the primary motivation for Dell’s actions? A stock option is an offer by a company that gives employees the right to buy a specified number of shares in the company at an agreed upon price (usually lower than market) by a specific date. The benefit of granting options to employees is viewed as a good thing because it (theoretically) aligned the interests of the employees (normally the key executives) with those of the common shareholders. If a material portion of a CEO's salary were in the form of options, she or he would be incited to manage the company well, resulting in a higher stock price over the long term. The higher stock price would benefit both the executives...
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...Distance Discount Services, Inc., the predecessor corporation to WorldCom. Pursuant to stock option agreements with Long Distance Discount Services, Inc., and then with WorldCom, Mr. Schroerlucke accumulated employee stock option grants between July 1991 and January 1998. His employment with WorldCom ended on January 4, 1999. According to the terms of the stock option agreements and an April 7, 1998 memorandum titled, “WorldCom Employee Stock Option Program,” Mr. Schroerlucke was required to immediately exercise all of his employee stock options at the end of his employment. On January 2, 1998, Mr. Schroerlucke had accumulated 172,492 WorldCom stock options. Mr. Schroerlucke exercised all of his existing stock options on February 12, 1999, at which time the market value of his 172,492 WorldCom shares was $13,702,333.25, based on the $79.4375 per share, February 12, 1999, closing price of WorldCom stock.1. According to the criminal Mr. Ebbers (CEO) and Mr. Sullivan (CFO Scott Sullivan) presented a “materially false and misleading picture of WorldCom’s operating performance and financial results” as part of a “scheme to deceive” and “inflate and maintain artificially the price of WorldCom common stock.” Mr. Schroerlucke was not eligible to participate in the securities fraud class action lawsuit which was brought against WorldCom on April 30, 2002. Only those who had purchased WorldCom stock between April 29, 1999 and June 25, 2002 were eligible. See In re WorldCom, Inc., Sec...
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...For many of us, finding a career that we deem fun and long-term is in itself a long journey. But having a successful career in life is not just for the rich and famous, it's also for the average person. We as humans are prone to look at successful individuals like Oprah or Bill Gates and assume that somehow they became wealthy and innovative overnight, but it truly took many years, time, effort, and perseverance. Choosing a career is an involved process that is based on a number of things, including your interests, skills, work-related values, and personality. And of course salary and bonuses take not the last place in our decision. I am doing my MBA program and I have to choose the field in which I will devote my life. I am interested in marketing, finance and HR, that is why I decided to compare these tree fields. The difference in salaries and bonuses are explained by level of responsibilities, PART 1 The difference in salary between International Marketing Manager; Financial Analysis Manager and Human Resources Manager is not so significant, but the field of activities is totally different. It is not surprising that international marketing manager is paid more than others. The median salary for international marketing manager is $101,484; for financial analysis manager is $98,905; for human resources manager $85,863 (10001, NY). In my opinion, in this case the main factor that can explain the difference in the salaries is your responsibilities. PART 2 Benefit...
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...employee response in this type of structure is much better. As you can see from the slide, we have implemented the best of both worlds. In the manufacturing portion of the process, there is no room for variances so input from other departments is not required. On the assembly line there is a lot more variances possible to get the same job done so input from other departments is required. What we have done is allowed other departments to have input to the process before changes are made instead of after. This enables departments to reap the benefits instead of repercussions of decisions made. * This empowers the employee with the decision that they make. At Riordan manufacturing we have taken it one step further, we offer Employee Stock Options which allows the employee to not only have a better working environment but to reap the financial benefits as well. * * * Identify characteristics of the company’s culture. What are the potential influences of the corporate culture on employee behavior? Company culture is the shared values or norms of an organization. Company culture can differ with in departments within organizations. This determines how employees are to behave or represent the company. This does not mean that they need to like it, just that they understand it. Organizational culture defines it’s self from one organization from another, it defines the boundaries. It also defines an organizations identity for the members and allows the individuals...
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...were residents of the State of Georgia. Plaintiff Donald Schroerlucke is a former employee of WorldCom, Inc. In 1989, Mr. Schroerlucke was employed as Vice President of Operations at Long Distance Discounts Services, Inc., the predecessor corporation to WorldCom. Pursuant to stock option agreements with Long Distance Discount Services, Inc., and then with WorldCom, Mr. Schroerlucke accumulated employee stock option grants between July 1991 and January 1998. Mr. Schroerlucke’s employment with WorldCom ended on January 4, 1999, at which time his stock options became fully and immediately vested according to the terms of the stock option agreements and an April 7, 1998 memorandum titled, “WorldCom Employee Stock Option Program,” once his employment ended, Mr. Schroerlucke was required to immediately exercise all of his employee stock options. The April 7, 1998 memorandum stated in part: “Please note that under WorldCom Inc. 1997 Stock Option Plan, all vested options must be exercised prior to termination with the Company.” After a final stock option grant award on January 2, 1998, Mr. Schroerlucke had accumulated 172,492 WorldCom stock options. Mr. Schroerlucke exercised all of his existing stock options on February 12, 1999, at which time the market value of his 172,492 WorldCom shares was 13,702,333.25, based on the...
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...Assessment of Employee Engagement in Organizations Word Count: 3005 Contents 1.0 Introduction 4 2.0 Employee engagement 4 3.0 Significance of employee engagement 5 4.0 Steps taken to enhance employee engagement 8 5.0 Steps to enhance employee engagement 10 6.0 Conclusion 13 7.0 References 14 List of figures Figure 1: Employee Engagement Model 4 Figure 2: Composition of Employee Engagement 5 Figure 3: Organizational Results of employee engagement 6 Introduction This report has been undertaken in order to discuss and assess the significance of employee engagement through various employee engagement models and the steps that can be taken in order to improve the employee engagement process in an organization. Various recommendations have also been provided in order to enhance the employee engagement in organizations at the end of the report. Significant company examples following appropriate employee engagement policies and their impact on employee satisfaction in the organizations have also been mentioned in detail. Employee engagement According to Albrecht (2010), Employee engagement is defined as the level to which the employees are loyal and motivated towards their work within a particular organization they work for. The level of pride they show while being a part of that organization and the extent of efforts they are willing to exert to achieve the organizational goals. Saks (2006) adds that employee engagement...
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...employee stock options as a motivator? Ans: Employee Stock Options (ESO): An employee stock option is a contract issued by an employer to an employee to purchase a set amount of shares of company stock at a fixed price for a limited period of time. A stock option granted to specified employees of a company. ESOs carry the right, but not the obligation, to buy a certain amount of shares in the company at a predetermined price. An employee stock option is slightly different from a regular exchange-traded option because it is not generally traded on an exchange, and there is no put component. Furthermore, employees typically must wait a specified vesting period before being allowed to exercise the option. Types of Employee Stock Options: There are two broad classifications of stock options issued: 1: Non-qualified stock options (NSO) 2: Incentive stock options (ISO). Practical Consequences Explanation: The idea behind stock options is to align incentives between the employees and shareholders of a company. Shareholders want to see the stock appreciate, so rewarding employees when the stock goes up ensures, in theory, that everyone is striving for the same goals. Critics point out, however, that there is a big difference between an option and the ownership of the underlying stock. If the stock goes down, the holder of an option would lose the opportunity for a bonus, but wouldn't feel the same pain as the owner of the stock. This is especially true with employee stock options...
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...must check in with your supervisor upon arrival. If employees need extra training, please inform the supervisor in the case they need extra training. Meal breaks are 30 minutes if working 8 or more hours. If working less than 8 hours, employees will get a 15 min break. Every first Monday of the month mandatory staff meetings take place in the conference department. You must attend the meeting. In the event you cannot attend, you must have prior approval from your supervisor. Our company is dedicated to providing the best retail experience to customers by offering competitive prices and equal employment opportunities. Our company offers extensive training and development programs and opportunities for growth within. We offer employee stock options and competitive incentives year round. This position is also eligible for medical, dental, and vision insurance as well as a percent matching 401k program. Our company offers a diverse cultural environment. We encourage...
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...Introduction This memorandum addresses our recommendation for Product Data Management and Visionary Design System employees. First, it states the principal and agent relationships. Second, it addresses the sources of problems with PDM. Third, it discusses solutions and recommendations for PDM and VDS employees. Finally, it discusses other organizational changes and concludes with a summary of our recommendations. Principal-Agent Relationships The PDM software provides organizational efficiency for VDS. As a result, the VDS executives serve as the principal and PDM is the agent. The executives of VDS pride themselves on working closely with the customers and departments as well, therefore, VDS serves as agents to customers. VDS has the greatest potential to achieve a great competitive advantage because it captured a large portion of the market from its previous services. As a result, VDS has the advantage of the opportunity to explain its extensive benefits for consumers’ design process during its consultations. PDM needs VDS’s respected brand in the market and it has the technological advances to bring in greater revenue for VDS as a whole. Sources of Problems with PDM VDS’s advantage develops from its consultation advice and the benefits and simplicity of the PDM software; however, without the cooperation and understanding from the Sales Representatives, this advantage fails. The consulting services were first cut to save money, but without them, the PDM service...
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...Seminar Human Resource Management (HR 491) Position Paper STEVEN H. HALL Computer Science Corporation a Global Leader in Technology Park University of Alexandria, Virginia 5 December 2010 2 TABLE OF CONTENTS Page Introduction . . . . . . . . . . . . . . . . 3 Body . . . . . . . . . . . . . . . . . . 4 Competitive Advantage . . . . . . . . . . . . 4 Change Management . . . . . . . . . . . . . . 5 Diversity Management . . . . . . . . . . . . . . 7 Recruitment and Selection. . . . . . . . . . . . . 9 Compensation and Benefits . . . . . . . . . . . . 11 Organizational Climate . . . . . . . . . . . . . 12 Conclusion . . . . . . . . . . . . . . . . . 13 Cited References . . . . . . . . . . . . . . 15 2 3 INTRODUCTION This position paper explains how and why Computer Science Corporation (CSC) is global leader in providing technology solutions and services through three primary lines of business: (1) Business Solutions and Services; (2) Global Outsourcing and Services; (3) North American Public Sector. CSC capabilities include systems design and integration, information technology and business...
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...2006, Sooner or Later Inc. granted its employees 1,000 “at the money” employee stock options, which will vest only when cumulative revenue in the next three-year reporting period exceeds $10 million and the employees are still employed by the company. As of the grant date, management believes that it is probable that the company's cumulative revenue over the next three-year period will be greater than $10 million. The grant-date fair value for each award is $9, though the company's valuation professionals have indicated that the grant-date fair value would be $6 if the fair value assessment includes the revenue target. Sooner or Later Inc. adopted ASC 718, Compensation – Stock Compensation in 2005, and it did achieve cumulative revenue in excess of $10 million over the next three years. The first problem in the case inquires whether Sooner or Later Inc. should use the $6 grant-date fair value or the $9 grant-date fair value to measure its compensation cost. The answer is Sooner or Later Inc. should use the $9 grant-date fair value. According to ASC 718-10-30-27, the grant-date fair value should not incorporate performance or service conditions that affect vesting because those conditions are restrictions that come from the forfeitability of instruments to which employees have not yet earned the right to benefit from the instruments. Sooner or Later Inc.'s restriction that employee stock options will vest only when cumulative revenue surpasses $10 million only affects vesting...
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