Sec settles mercury backdating brocade
Any problems with option grants, especially when they result in tax and/or accounting penalties, not to mention regulatory enforcement levies or litigation payouts, can do serious harm to an employee's retirement plan.
In the wake of several stories about 401(k) stock drop litigation, one connects the backdating - company stock dots by asking: "How much extra homework should pension fiduciaries undertake before recommending company stock (if at all) when the terms of prevailing option awards are misunderstood, questionable or insufficiently transparent?
Did an adequate due diligence review of risk factors that influence company stock price occur?
Did pension fiduciaries sufficiently understand existing practices regarding executive compensation, including option awards?
Option valuation is another topic with considerable import.
Relatively new accounting rules in the form of FAS 123R set the stage for a vigorous debate about how to value employee and executive stock options (ESO's).