After 9/11, Scores Of U.S. Firms Rushed To Give Millions In Options To Top Execs

[Gold9472]

WSJ: After 9/11 as stocks sank, scores of US firms rushed to give millions in options to top execs

http://www.rawstory.com/news/2006/WSJ_After_911_as_stocks_sank_0715.html

Published: Saturday July 15, 2006

After 9/11 as stocks sank, scores of US firms gave millions in options to top executives, reports the Wall Street Journal on the front page of Saturday's paper.

The paper asks, "Did companies take unseemly advantage of a national tragedy?"

"A review of Standard & Poor's ExecuComp data for 1,800 leading companies indicates that from Sept. 17, 2001, through the end of the month, 511 top executives at 186 of these companies got stock-option grants," reports the Wall Street Journal.

One former stock-option-committee member for a Michigan firm defends the giveaways to the Wall Street Journal.

"If you believe the company is going to do well, and here is an external event that is affecting the market and you've made a decision to reward executives, you go ahead with it," John Lillard told the Wall Street Journal.

"Life goes on," Lillard added.

Excerpts from the article written by Charles Forelle, James Bandler and Mark Maremont:

Ninety-one companies that didn't regularly grant stock options in September did so in the first two weeks of trading after the terror attack. Their grants were concentrated around Sept. 21, when the market reached its post-attack low. They were worth about $325 million when granted, based on a standard method of valuing stock options.

The 91 companies included such corporate icons as Home Depot Inc., Black & Decker Corp. and UnitedHealth Group Inc. It included two companies directly touched by the tragedy. Merrill Lynch & Co., across the street from the Twin Towers, lost three employees. On Sept. 24, Merrill granted its president options to buy more than 750,000 shares, at a price 15% below the pre-attack level. At Teradyne Inc. in Boston, an employee delayed a business trip until Sept. 11 to attend a son's soccer game and died on American Flight 11. Teradyne that month gave its CEO more than 600,000 options at a price enabling him to buy stock at 24% below its pre-attack level.

There's nothing illegal about granting options after the market plunges. But acting so quickly after a national tragedy drove down stocks shows the eagerness of some companies to increase their executives' potential wealth. These grants also offer important new fodder for an already fractious debate over what constitutes the proper use of options in executive compensation.

[beltman713]

"Life goes on," Lillard added.
"Life goes on". Spoken like a true capitalist! It was only 3000 people. I'm sure he didn't lose any of his family.

[Gold9472]

Executives given cut-price stock options in weeks after 9/11

http://www.guardian.co.uk/september11/story/0,,1822223,00.html

Dan Glaister in Los Angeles
Monday July 17, 2006
The Guardian

Executives at leading US companies could make millions through the award of stock options issued in the weeks after the September 11 2001 terrorist attacks.

Nearly 200 US companies awarded options to their board members in the wake of the attacks when share prices were at historic lows, giving executives the chance to make millions of dollars later as values returned to normal levels.

Prominent companies including Black & Decker, Home Depot and United Health offered more than 500 executives stock options worth a total of $325m (£177m) in the last two weeks of September 2001.

Companies directly affected by the attacks, including Merrill Lynch, which lost three employees on September 11, offered stock to senior executives, according to a report in the Wall Street Journal.

On September 24, Merrill Lynch president Stanley O'Neal was granted the option to buy 750,000 shares at a price 15% lower than the level prior to the attacks. On that day the financial services group's shares were trading at $39.80. Today they trade at more than $67 per share, offering Mr O'Neal a potential profit that is $5m greater than if the shares had been offered before the attacks.

Stock options are typically used by companies to reward executives. But the practice has come under scrutiny as it offers recipients the right to buy shares at the same price for years to come.

In the days after the 9/11 attacks, the US stock market closed and share prices fell 14%, the worst week for the Dow Jones Industrial Average since the Nazi invasion of France in 1940. It reopened on September 17 in a solemn ceremony.

That same day, the DIY retailer Home Depot issued a stock option to its recently appointed president Robert Nardelli that allowed him to purchase a million shares over 10 years at that day's price of $36.20. The share price on September 10, the day before the attacks, had been $40.55.

Companies defended the practice, saying the options were a way of calming and offering an incentive to executives in the tumultuous weeks after 9/11. Merrill Lynch denied that the timing of the offer was related to the attacks.