Wonder if the Pens knew he was a fraud?

http://www.post-gazette.com/pg/07064/767001-100.stm

Sounds like John Rigas all over again. Tried to step in to be the savior, but probably didn't have the funds to do it.

 

Nothing fraudulent here. They were merely restating their financials from the last couple of years.

The issue isn't about illegal behaviour but about correcting a rather informal procedure for granting stock options.

Here'as an update:

http://www.theglobeandmail.com/servlet/story/RTGAM.20070305.wrim0305/BNStory/Business/home

“The grant process was characterized by informality and a lack of definitive documentation, and lacked safeguards to ensure compliance with applicable accounting, regulatory and disclosure rules,” the company said in the release."

 

Mispricing options is a serious misstep. Restating the financials is SOP, but if they've not been dealt with for the pricing game, trouble may be around the bend.

 

JR, I'm confused, then.
Why was he effectively stripped of his job?

 

He was both Chairman & CEO which is generally considered a no-no in today's corporate governance universe.

He will continue to be co-chief executive officer with Michael Lazaridis.

 

Nowhere do I see the term "backdating," but that clearly is what is going on here -- and hundreds of other companies. Backdating is when you award options based on the date of the lowest price over the previous 52 weeks, not on the actual date the options are awarded. It is legal if companies disclose to shareholders that this is how they award options to executive. But I believe zero companies have actually done this. Soon enough, some company or CEO is going to get indicted over backdating. It's an illegal perversion of the point of awarding options, which is to give CEOs a further incentive to perform so they and the company both benefit. Of course, you can argue that options themselves have been a legal perversion, because that is where CEOs make the bulk of their income.