CPE Session 36: Sunday, August 3, 1:00 PM – 4:00 PM

Corporate Governance Failures: The Case of Stock Options

(Specialized Knowledge & Applications – Overview)

Description/Objectives:
Last year, a whopping 31.5% of financial statement re-statements were attributed to stock options accounting problems. In a post-Sarbanes Oxley section 404 and a post-FAS 123 (R) accounting environment, such statistics raise uncomfortable questions about internal controls over financial reporting related to stock options that clearly demand our attention. Fair value measurements required under FAS 123 (R) are complex, but the stock option backdating scandals that emerged—as a result of academic research findings--only served to intensify the focus on the area, forever changing the world of stock plan administrators. Improper option granting practices could create legal and reputational risks, cause financial statement re-statements, and result in other contingencies. Stock-based compensation practices, however well-intentioned at inception, have generated spectacular failures in corporate governance and appear to be fertile ground for continued academic research. The session will provide an overview of what’s happening in the world of stock option accounting, provide the larger context by describing the good, the bad, and the ugly of stock options, link these considerations to corporate governance issues, outline future trends and point to academic research possibilities.

Presenters:
Andrew Bailey, Jr., Grant Thornton, LLP
Don Delves, The Delves Group
Robert Finocchio, Santa Clara University
Sridhar Ramamoorti, Grant Thornton LLP
Scott Taub, Financial Reporting Advisors, LLC
Phil Wedemeyer, Grant Thornton, LLP

Note: CPE fields of study are in parentheses