CEOs Beat the Odds With Stock Options

[Omaha Steve]

http://blog.aflcio.org/2007/04/05/ceos-beat-the-odds-with-stock-options/

CEOs Beat the Odds With Stock Options

by James Parks, Apr 5, 2007

Your odds of winning the lottery with a $1 Powerball ticket are one in 146 million. But if you are a corporate CEO, you can almost guarantee you’ll hit the jackpot several ways by rigging the system to get a perfect payday.

One of the more popular ways CEOs beat the odds has involved backdating the stock options their corporate boards granted them, picking a date when the stock was trading at a lower price than the date of their options grant, resulting in an instant profit. Many CEOs did just that last year in what has become the biggest executive pay scandal in decades.

According to the AFL-CIO’s 2007 Executive PayWatch website, released today, 257 companies have announced internal reviews, Securities and Exchange Commission (SEC) reviews or Justice Department subpoenas related to stock option grants.

http://www.aflcio.org/corporatewatch/paywatch/

This year, the PayWatch website features case studies of CEOs who backdated stock options to take what they want from their companies and their shareholders with impunity. The case studies highlight the need for reform to protect companies and their investors—and the PayWatch site makes it easy for users to contact the SEC and member of Congress to urge new rules governing executive pay.

In 2006, the average CEO of a Standard & Poor’s 500 company made $14.78 million in total compensation, according to initial estimates. Where available, this year the PayWatch site includes some of the executive compensation data required under new rules issued by the SEC in 2006. The new disclosure rules go further than ever before in revealing just how much executives are paid, making transparent previously hard-to-find information such as pension totals.

But a last-minute change in the rules weakened requirements for disclosure of stock options. The new PayWatch site will provide, in comparison with the SEC provided total, the total compensation an executive received that includes the total value of stock and option awards granted in 2006, giving a better representation of what the CEO was awarded in 2006.

FULL article at link.