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Subject:  Re: The WSJ: New Look, Same Blind Spot Date:  1/4/2007  9:40 PM
Author:  WatchingTheHerd Number:  200324 of 603391

Although most CEOs and top executives do not deserve such mega compensation, in a way option backdating is a "relatively" cheaper way to pay for this largese.

If the board decided to award the CEO $40 million, by back-dating to a date when the strike price was low, they were giving the CEO lesser number of shares.

In a way, back-dating was doing was doing less damage.


I'm not sure I understand / agree with your point.

I think you're assuming that the total quantity of outstanding shares over the life of the grant is small enough so the quantity of options involved with these grants is material in relation to that larger pool. Via backdating, fewer units of shares were required to provide the same dollar value of compensation, thus preventing a large monetary award from altering the voting balance of power of the company as much as it otherwise would have.

For virtually all of these firms involved, the quantity of shares as a percentage of total outstanding votable shares are a blip on the radar (Home Depot for example has two billion+ shares outstanding), and thus the recipient isn't getting a materially diluted voting bloc via backdating versus "fair-dating". They have no real "voting" power per se at all. Of course, they don't need voting power to steer the company. They control the information reaching the board in some cases or reaching shareholders who collectively control the vote or throw it away by allowing the board to vote their proxy.

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