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The request went up (in comments) for a who’s who list of the post 9/11 stock option granters and grantees.
I put in a request to the WSJ journalists on the story; Meanwhile, the best I can offer up are some excerpts from the WSJ sidebar (with graphics).
Kudos to the Journal for another terrific piece of investigative journalism. Now if you guys would only stop burying killer stories on Saturday . . .
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The short list of egregious offenders is after the jump.
Executive Pay: The 9/11 Factor
WSJ: "As stocks sank after the 9/11 attacks, scores of companies rushed to issue options to top officials. For recipients of options, the lower their company’s stock price when options are awarded the better, since the options grant a right to buy shares at that price for years to come. The grants set recipients up for millions of dollars in profit if the shares recovered. Here is a look at grants made in September 2001."
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Home Depot
Number of top-level executives receiving grants: 5
Total estimated Black-Scholes value at time of grants: $19.2 million
Difference between Sept. 10 close and the options’ exercise price: Down 10.7 % as of 9/17; Down 9.5% as of 9/18Company comment: Said board approved "special equity award" on Sept. 17 and Sept. 18 to "retain key executives."
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J. Jill Group
Number of top-level executives receiving grants: 5Total estimated Black-Scholes value at time of grants: $2.5 million
Difference between Sept. 10 close and the options’ exercise price: Down 34.2%
Company comment: Former director said he can’t recall any effort to time award to low stock price. Talbots, which acquired J. Jill, said it can’t comment because events happened before acquisition.
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Merrill Lynch
Number of top-level executives receiving grants: 1
Total estimated Black-Scholes value at time of grants: $14.4 millionDifference between Sept. 10 close and the options’ exercise price: Down 15%
Company comment: Said grant to Stanley O’Neal was directly tied to his July promotion to president, not related to 9/11. Ex-head of committee said firm would never try to time grants to occur after a national tragedy.
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PeopleSoft
Number of top-level executives receiving grants: 2
Total estimated Black-Scholes value at time of grants: $2.0 million
Difference between Sept. 10 close and the options’ exercise price: Down 38.4%Company comment: Cyril Yansouni, a former director, said he had "absolutely no recollection" of 2001 grants but said company didn’t try to time options grants to hit market lows.
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Sandisk
Number of top-level executives receiving grants: 2
Total estimated Black-Scholes value at time of grants: $2.1 million
Difference between Sept. 10 close and the options’ exercise price: Down 30.9%Company Declined to comment
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Teradyne
Number of top-level executives receiving grants: 7
Total estimated Black-Scholes value at time of grants: $14.3 million
Difference between Sept. 10 close and the options’ exercise price: Down 24.2%
Company comment: Said grants were triggered by retrenchment plan that began before 9/11 attack and were unrelated to the attack.>
T. Rowe Price
Number of top-level executives receiving grants: 2
Total estimated Black-Scholes value at time of grants: $1.5 million
Difference between Sept. 10 close and the options’ exercise price: Down 26.7%Company comment: Chairman George Roche said grants "had nothing to do with 9/11" and "you didn’t know that there wasn’t going to be a second round of attacks."
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UnitedHealth
Number of top-level executives receiving grants: 1
Total estimated Black-Scholes value at time of grants: $ 675,000
Difference between Sept. 10 close and the options’ exercise price: Down 9.7%Company comment: Declined to comment, citing ongoing review of options program by a special committee of the board.
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Weatherford
Number of top-level executives receiving grants: 5
Total estimated Black-Scholes value at time of grants: $13.8 million
Difference between Sept. 10 close and the options’ exercise price: Down 29.7%Company comment: Said meeting that gave options was prescheduled for Sept. 12 and postponed. Said there was no attempt to time options to low price.
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Werner Enterprises
Number of top-level executives receiving grants: 5
Total estimated Black-Scholes value at time of grants: $8.5 million
Difference between Sept. 10 close and the options’ exercise price: Down 26%Company comment: Chief Financial Officer John J. Steele said the Sept. 28 grant did not mark a yearly low, and said "no one knew what direction the market was going to move in the future."
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Sources: FactSet Research Systems, WSJ Market Data Group; Standard & Poor’s ExecuComp; the companies; WSJ research
I guess the option grant solution is very easy – a requirement that it be approved by the shareholders annually – BEFORE THEY CAN BE GRANTED. SHAREHOLDER GUIDELINES.
Maybe even an SEC ruling – requirement. things that board of directors cannot do.
PAUL
I actually find comments such as “to retain key employees” or we didn’t know what way the stock was heading disingenuous at best. First where were the execs going, were they planning on enlisting, and I thought that options were awarded one merit or as an additional incentive. Maybe by Monday Home Depot can come up with a better explanatiion.
“to retain key employees”… yeah right. That would be the “I think you all are so stupid you’ll believe this” excuse. The kind we are so used to hearing on Fox news every day.
“to retain key employees”
Bob Nardelli got how many shares???? He’d been at the Helm of Home Depot less than year and they really thought he might jump off the roof after 911?
If Nardelli had left, the shares might be higher. He has turned into (or been revealed to be) an anti-shareholder tyrant from what I have read. Should have stayed below the radar at GE. Obviously not too clever at the spin control of public performances or rallying the troops, er employees, at Home Depot.
I guess their rationalization is somebody will profit from it so it might as well be us.
Is it time for Nardelli to make a special appearance on Fox explaning how he got the options until the Board could make his compensation completely performance based. Or is that just a rehash of what he said on CNBC?
You know when this stuff ends? When board members start losing elections because of it. Board memberships are really nice little sinecures; take the toys away and boards just might start to get it.