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More on “Special” 9/11 Stock Option Grants

Posted By Barry Ritholtz On July 16, 2006 @ 8:28 am In Corporate Management | Comments Disabled

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The request went up (in comments [3]) for a who’s who list of the post 9/11 stock option granters and grantees.

I put in a request to the WSJ journalists on the story; Meanwhile, the best I can offer up are some excerpts from the WSJ sidebar [1] (with graphics).

Kudos to the Journal for another terrific piece of investigative journalism. Now if you guys would only stop burying killer stories on Saturday . . .

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The short list of egregious offenders is after the jump.

Executive Pay: The 9/11 Factor

WSJ [4]:   "As stocks sank after the 9/11 attacks, scores of companies rushed to issue options to top officials. For recipients of options, the lower their company’s stock price when options are awarded the better, since the options grant a right to buy shares at that price for years to come. The grants set recipients up for millions of dollars in profit if the shares recovered. Here is a look at grants made in September 2001."
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Home Depot
Number of top-level executives receiving grants: 5
Total estimated Black-Scholes value at time of grants: $19.2 million
Difference between Sept. 10 close and the options’ exercise price: Down 10.7 % as of 9/17; Down 9.5% as of 9/18

Company comment:  Said board approved "special equity award" on Sept. 17 and Sept. 18 to "retain key executives."

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J. Jill Group
Number of top-level executives receiving grants: 5

Total estimated Black-Scholes value at time of grants: $2.5 million

Difference between Sept. 10 close and the options’ exercise price: Down 34.2%

Company comment:  Former director said he can’t recall any effort to time award to low stock price. Talbots, which acquired J. Jill, said it can’t comment because events happened before acquisition.

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Merrill Lynch
Number of top-level executives receiving grants: 1
Total estimated Black-Scholes value at time of grants: $14.4 million

Difference between Sept. 10 close and the options’ exercise price: Down 15%

Company comment:  Said grant to Stanley O’Neal was directly tied to his July promotion to president, not related to 9/11. Ex-head of committee said firm would never try to time grants to occur after a national tragedy.

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PeopleSoft
Number of top-level executives receiving grants: 2
Total estimated Black-Scholes value at time of grants: $2.0 million
Difference between Sept. 10 close and the options’ exercise price: Down 38.4%

Company comment:  Cyril Yansouni, a former director, said he had "absolutely no recollection" of 2001 grants but said company didn’t try to time options grants to hit market lows.

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Sandisk
Number of top-level executives receiving grants: 2
Total estimated Black-Scholes value at time of grants: $2.1 million
Difference between Sept. 10 close and the options’ exercise price: Down 30.9%

Company Declined to comment

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Teradyne
Number of top-level executives receiving grants: 7
Total estimated Black-Scholes value at time of grants: $14.3 million
Difference between Sept. 10 close and the options’ exercise price: Down 24.2%
Company comment:  Said grants were triggered by retrenchment plan that began before 9/11 attack and were unrelated to the attack.

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T. Rowe Price
Number of top-level executives receiving grants: 2
Total estimated Black-Scholes value at time of grants: $1.5 million
Difference between Sept. 10 close and the options’ exercise price: Down 26.7%

Company comment:  Chairman George Roche said grants "had nothing to do with 9/11" and "you didn’t know that there wasn’t going to be a second round of attacks."

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UnitedHealth
Number of top-level executives receiving grants: 1
Total estimated Black-Scholes value at time of grants: $ 675,000
Difference between Sept. 10 close and the options’ exercise price: Down 9.7%

Company comment:  Declined to comment, citing ongoing review of options program by a special committee of the board.

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Weatherford
Number of top-level executives receiving grants: 5
Total estimated Black-Scholes value at time of grants: $13.8 million
Difference between Sept. 10 close and the options’ exercise price: Down 29.7%

Company comment: Said meeting that gave options was prescheduled for Sept. 12 and postponed. Said there was no attempt to time options to low price.

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Werner Enterprises
Number of top-level executives receiving grants: 5
Total estimated Black-Scholes value at time of grants: $8.5 million
Difference between Sept. 10 close and the options’ exercise price: Down 26%

Company comment:  Chief Financial Officer John J. Steele said the Sept. 28 grant did not mark a yearly low, and said "no one knew what direction the market was going to move in the future."

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Sources: FactSet Research Systems, WSJ Market Data Group; Standard & Poor’s ExecuComp; the companies; WSJ research


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URLs in this post:

[1] Image: http://online.wsj.com/public/resources/documents/info-TimingOP0607-14.html

[2]
: http://bigpicture.typepad.com/photos/uncategorized/wsj_head_2.gif

[3] comments: http://bigpicture.typepad.com/comments/2006/07/post911_option_.html#comments

[4] WSJ: http://online.wsj.com/article/SB115292514221107632.html

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