Magazine article Workforce Management

Option Scandals Might Put Hr in Watchdog Role

Magazine article Workforce Management

Option Scandals Might Put Hr in Watchdog Role

Article excerpt

COMPENSATION

Recent scandals involving companies backdating their stock option grants to employees may help HR managers get that seat at the table they've longed for.

However, it might not be the seat they wanted.

On July 20, the U.S. attorney for the Northern District of California, the Securities and Exchange Commission and the FBI filed criminal and civil charges against former executives of Brocade Communications, a San Francisco hightech firm, for backdating stock options to employees between 2000 and 2004.

The charges allege that Gregory Reyes, Brocade's former CEO, and Stephanie Jensen, the company's former vice president of human resources, backdated stock options to current and new employees to give them the opportunity for a greater windfall. The civil charges also name the company's former CFO, Antonio Conova, who is alleged to have learned of the backdating after joining the company in December 2000.

"In some instances, employment offer letters and compensation committee minutes were falsified and purported to document option grants to employees before they had even been hired by the company," according to a joint statement by the sec and Justice Department. "As a result of this practice, Brocade was able to give employees 'in-the-money' stock options without having to recognize compensation expenses as required by accounting rules."

The case is part of a larger investigation of more than 80 companies by both the Justice Department and sec, and more charges are expected, officials say. …

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