CNET: More On Bonnie’s Resignation, Options Query

Shelby Bonnie’s resignation as CNET chairman and CEO comes as companies ranging from Apple to United Health are feeling the effects of investigations into the way stock options have been handled. The practice in question: backdating. Cablevision Systems even backdated options for a dead executive, although none of its execs left over the results of that investogation. Apple admitted earlier this month that Chairman and CEO Steve Jobs knew of some occasions when options had been backdated. At the same time Bonnie’s resignation was going public, McAfee announced that George Samenuk, chairman and CEO, had resigned while Kevin Weiss, president, was fired. Novell is investigating stock options issued when Eric Schmidt, now chairman and CEO of Google, was CEO. The investigations aren’t all internal: the SEC, the DOJ and other agencies are looking into how the options were handled as well as how companies are handling the situation now.
The CNET investigation: Announced May 22, the investigation by CNET’s special committee of independent directors Peter Currie and Betsey Nelson was assisted by outside legal counsel Davis Polk & Wardwell and accountants from Navigant LLC. After dozens of interviews and a look at more than 700,000 documents and emails, they:
— did not conclude there was any wrongdoing by current employees or recently resigned employees but that a number of executives of the Company, including the former CFO and the recently resigned CEO, General Counsel and SVP of Human Resources, bear varying degrees of responsibility for these deficiencies.”
— determined some backdating of option grants occurred from the time of the CNET IPO in 1999 through at least 2003
— That steps had been taken in 2003 to fix those problems.
— Recently resigned executives and directors who received improperly priced options will have the options repriced to fair market value on the appropriate measurement date.
TheStreet: Keeping Bonnie on the board is causing some bemusement: Jim Post, professor of management at Boston University: “The cleanest way to do this would be to have him leave the board. … I can only think that the board concluded that based on his reputation and based on his knowledge, it’s more valuable to keep him on the board in some capacity. That makes sense to me, but it’s also very clear that that board knows that they cannot maintain their credibility and have him in a position of leadership.”

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