OLD Media Moves

Kudos to biz reporters on options backdating coverage

May 25, 2006

John R. Austin, an organizational behavior professor at Penn State’s Smeal College of Business, lauds the recent coverage in the financial press regarding the options backdating scandal, as well as the academics who helped uncover this issue, on his “Monty’s Bluff” blog.

And he offers a suggestion on where the reporting should go next.

John R. AustinAustin writes, “I take my hat off to Charles Forelle and James Bandler. Mr. Forelle and Mr. Bandler are the journalists responsible for the initial Wall Street Journal article on this issue. They have also written some of the follow up work as well. These articles illustrate the power of well-researched business journalism. Without their work, the academic research would remain known to just a few. Translating academic work is not an easy task and these journalists have done it well.

“Dr. Lie, Dr. Heron, Mr. Forelle, and Mr. Bandler. Consider this my IOU to all of you. Someday track me down and dinner is on me.

“Two things about the backdating story still need to come to light.

“1. What role, if any, did executive compensation consultants play in this practice? I will not be surprised to learn that backdating was being sold as a legitimate strategy by unscrupulous outside consultants.

“2. What role did board interlocks play in spreading this practice? Following the linkages between executives and boards may be a nice way to identify other guilty companies.

“Even though this practice of backdating appears to be limited to the time before Sarbanes-Oxley, the investigations are still relevant. These executives betrayed their positions of trust. Many are still in their executive positions and still sit on boards.”

Read more here.

Here is a copy of the page one article written by Forelle and Bandler.

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