Ethics of stock option backdating

Excerpt: So much interest and concern over stock option backdating and repricing, evinced by so many individuals and organizations, bodes poorly for the legitimacy of the potential motives for such actions.Such actions cannot withstand examination under any ethical test and should raise concern among investors, creditors, executives, and boards of directors.The case was investigated by the FBI, the Internal Revenue Service Criminal Investigation (IRS-CI), and the Washington State Department of Financial Institutions (DFI).Assistant United States Attorney Jim Lord and DFI Senior Attorney Janet So led the investigation. The Chief Compliance Officer will work with the Controller and Chief Financial Officer in adopting written procedures to ensure that information is shared between internal departments responsible for Costco’s equity compensation program.Significantly, Costco has also committed to retain an independent auditor or law firm to review Costco's compliance and ethics program, to make recommendations as to any additional modifications to the program, and to conduct such an independent review at least once per year for a period of no less than three years.Conversely, variables one would expect to be related to the magnitude of direct out-of-pocket expenses, namely the number of past grants and/or their value, are not significantly related or are positively related to shareholders’ wealth effects, inconsistent with the direct cost hypothesis.

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