Honors Theses
Date of Award
2008
Document Type
Undergraduate Thesis
Department
Accountancy
First Advisor
Rick Elam
Relational Format
Dissertation/Thesis
Abstract
"More than 100 companies are under investigation for options backdating... If options backdating problems are found at more companies, Congress may be driven to act. ” - Brian Cleaiy (Cleary 2007). The purpose of this thesis is to analyze how the practice of backdating employee stock options has become so widely used. The first hypothesis for this research is that networking between executives and board members of corporations has caused the idea of backdating employee stock options to spread. The second hypothesis is that particular auditing firms are more likely than others to audit corporations accused of backdating employee stock options. A sample of sixteen companies suspected of backdating was used for the testing of these hypotheses. For each of the companies, the names of their executives and board members were collected from the companies’ Form 10-Ks covering the period of the suspected backdating. These names were then scrutinized for any overlap between different companies. The results of the analysis exposed two instances where an executive or board member of a company suspected of backdating employee stock options was also an executive or board member of another company also suspected of backdating employee stock options. Steven P. Jobs contemporaneously served as Chief Executive Officer and a board member of Apple Computer and Pixar. James A. Johnson served as a board member for both KB Home and UnitedHealth Group. It was also discovered that from the six audit firms providing assurance services for the companies in the sample. PricewaterhouseCoopers, LLP was the auditor for six of the sixteen companies suspected of backdating employee stock options. KPMG, LLP was the responsible firm for four of the companies in the sample. The findings produced by the research do not lead to conclusive evidence that the pervasive practice of backdating employee stock options is caused by the actions of one or two executives spreading the idea from company to company. Additionally, the discovery that PricewaterhouseCoopers, LLP was the auditor for more companies suspected of backdating employee stock options than other audit firms does not prove that the firm was responsible for carrying the idea for backdating from one client company to another. From the limited sample of companies tested in this research, it does not appear that networking between executives and board members is accountable for the numerous scandals revolving around backdating employee stock options.
Recommended Citation
Lo, Rebecca Kin-Ming, "An Analysis of Networking Between Top Executives of Companies Suspected of Backdating Stock Options" (2008). Honors Theses. 2055.
https://egrove.olemiss.edu/hon_thesis/2055
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