Option(s) Anxiety and CNET

We all get option anxiety now and then--just pull up to a vending machine and watch it set in. But the options anxiety plaguing Silicon Valley nowadays is not the pleasant and sweet kind.

A source today told me that there are now 144 formal investigations inside companies looking into their practices of granting employee stock options. He said that number was only about 10 percent of the actual cases of companies out there with problems in the way they either backdated or favorably priced shares. It doesn't take much poking around to find this information in proxies, and maybe it's becoming apparent to companies that it's only a matter of time before somebody notices.

One business school professor told me today that companies come forward to try to get on good terms with the U.S. Securities and Exchange Commission--to let them know that they're cooperating.

This was a nicely done piece (login required) on CNET General Counsel Sharon Le Duy by an enterprising reporter at The Recorder. I hope we see more of this depth of reporting. The surface reports on these options pricings is not telling the full picture. It's illustrative to see what kinds of favorable prices were given.

Thie practice of backdating is not illegal as long as it was properly accounted for and filed on.

And maybe some of these pricing arrangements were not all that crooked. A source today told me that the media is on a "witch hunt" in the way that it is going after favorable options grants pricing. The source said that most of the time the stock isn't even worth anything--with and early stage company--and so it was not even worth making a fuss over. He indicated that it was stifling to business in general this attitude. I think that's the same line of thinking that has issues with Sarbanes-Oxley. That's it's stifling innovation. That it's forcing companies to give up the public markets in the U.S. Makes sense.

Options are rewards for innovators, after all. I guess I'd be happy if my options were favorably priced and backdated. Oh, the investors ...