The executive compensation scandal continues on unabated. The only shock at this point is that none of these threads are all that shocking anymore. Yesterday we had a few items in our linkfest. We reprint them below.

Charles Forelle, James Bandler and Mark Maremont in the Wall Street Journal continue the paper’s series on the topic of executive options abuse. If proven true, the case of companies doling out options in the wake of September 11th is particularly egregious.

Barry Ritholtz has a strong reaction to the above story here and here. Larry Ribstein at Ideoblog is not convinced either legally or journalistically. (via Mark Hulbert in the New York Times highlights a study that shows that option issuance, contrary to expectations, rose after the implementation of option expense rules.

Since then we have come across additional reactions to the 9/11 story and additional research has come out showing that options backdating was far more widespread than originally thought. Two member of our blogroll have decidedly different takes on this most recent “scandal.”

Eddy Elfenbein at Crossing Wall Street thinks the Wall Street Journal “…is reporting on a scandal that’s not scandal involving profiteering that didn’t make money. In short, Eddy believes this story paints with too broad a brush.

Adam Warner at the Daily Options Report looks past the question of the actual legality of this options issuance and focuses in on the ethical ramifications. If you are wondering we are firmly in the Warner/Ritholtz camp on this one.

If that were not enough for you, Stephanie Saul in the New York Times reports that a re-examination by the academics who initially documented options backdating now finds evidence that the practice was far more widespread than originally thought.

An author of the study said the analysis suggested that the disclosures so far about backdated stock options may be just the tip of the iceberg.

“It is pretty scary, and it’s quite surprising to see,” said Erik Lie, an associate professor of finance at the Tippie College of Business at the University of Iowa.

This research will undoubtedly add to the ongoing discussions of this topic and could lead to additional legal investigations into specific companies and their options issuance.

Paul Kedrosky notes that in the referenced study technology companies were more likely to engage in what seems to be options backdating. DealBook mentions some specific tech companies that are already under the options microscope. Barry Ritholtz notes that tightened rules has dramatically reduced the opportunity to engage in options backdating.

We apologize for the length of this post, but there are a number of moving parts and a diverse range of options. We think the bottom line on the entire excessive executive compensation stories, including options backdating is a simple one. Just because something may be legal does not make it ethical. Executives and the boards of directors who ostensibly run these companies have a fiduciary duty to run these firms in the best interest of their shareholders.

We looked up the definition of fiduciaries just to remind ourselves of the precise meaning. (via

n. pl. fi·du·ci·ar·ies
One, such as an agent of a principal or a company director, that stands in a special relation of trust, confidence, or responsibility in certain obligations to others.

It is hard to read any of the stories on options issuance and think that these corporate boards are acting in any way, shape or form as true fiduciaries.