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“Executive compensation has provoked comment like no other issue, chiefly because many shareholders have a keen and legitimate interest in knowing how boards are compensating top executives — they want to know whether the managers’ interests are aligned with their own.”
“Following the reforms of the last few years, we have more disclosure, more transparency, more accountability, and more tools for directors and stockholders than ever before. We should not through enforcement actions undercut the business judgment rule — we do so to the peril of stockholders. When we focus on corporate compensation arrangements and on practices regarding granting of stock options, we must take care not to undermine a compensation arrangement that has served shareowners so well for so many years.” ~Atkins
Spring loading and bullet dodging
Another ethical issue that is being examined is spring loading and bullet dodging. Sarbanes Oxley’s new requirement that all options must be reported within two days of their issuance essentially makes it impossible to backdate stock options. In order to get around this and to continue giving the executives large compensation companies have resorted to the two new tactics of spring loading and bullet dodging. Spring loading is the practice of issuing stock options before reporting good news to the public. This would allow them to price the options at a lower price, and then reap the benefits of the increase in stock price due to the good news. Bullet dodging is just the opposite. It is when bad news is reported prior to the issuance of stock options. Here the company reports the bad news before the planned stock ...