The NASPP Blog

M&A Spring-loading: Scandal or Snore?
Last week, the Wall Street Journal ran a front-page story on what it believes may be the next big option scandal: companies granting options to executives in advance of business combinations (“Option Grants Draw Scrutiny,” October 12). The Journal reports on a study (presented at academic conferences but as yet unpublished) that analyzed more than 100 mergers and acquisitions in which target company CEOs received unscheduled stock options prior to the public announcement of the merger or acquisition, which proved to be very valuable to the CEOs once the deals closed. It’s also possible the grants may have avoided some 280(g) taxation, but I can’t quite figure that bit out because I’ve never really understood that section of the tax code (turns out that you can pass the CEP Level III exam without understanding 280(g)–or at least you could when I took the exam).

The Journal views this as similar to option backdating and there are certainly folks that agree with them. But others aren’t so sure. For one thing, it isn’t clear that spring-loading, i.e., granting options in advance of positive company announcements, is really illegal. Spring-loading is generally discouraged because it has the appearance of manipulation and it irks shareholders, who could later retaliate by withholding votes for directors or stock plans (or, once say-on-pay goes into effect, executive pay packages). And there may be fiduciary concerns but it isn’t clear that spring-loading constitutes fraud, a la backdating, or insider trading.

It also isn’t clear that these grants constitute poor corporate governance. The study assumes the deals would have closed even if the CEOs hadn’t received the grants and that, as a result, shareholders realized less on the mergers. But another theory holds that the grants might have been necessary to convince the executives to agree to the merger or acquisition, since, in most cases, execs are out of a job once their company is acquired.

How to Play Cricket
Last week I blogged about a cricket team in India that is considering granting stock options to its players. Ten points to Mike Albert of Fidelity (and president of the Boston NASPP chapter) for cobbling together a 98-word explanation of cricket (with a little help from Wikipedia):

A cricket match is played on a cricket field at the center of which is a pitch. The match is contested between two teams of eleven players each. One team bats, trying to score as many runs as possible without being dismissed (“out”) while the other team bowls and fields, trying to dismiss the other team’s batsmen and limit the runs being scored. When the batting team has used all its available overs or has no remaining batsmen, the roles become reversed and it is now the fielding team’s turn to bat and try to outscore the opposition.

Hmmm, I’m still not sure I understand it. I think I’ll stick with baseball.

NASPP Conference is Sold Out!
While other conferences are struggling for attendees, the NASPP Conference is sold out. I think this may be the first time in our 17-year history that we’ve had to cut off registration. If you wanted to attend but haven’t registered yet, it’s too late to attend live in San Francisco but you can still purchase the Conference audio. Purchase just the sessions you want or save by purchasing one of the package deals.

For our service provider members, if you were thinking of skipping the NASPP Conference this year, you might want to rethink that decision. We’re going to have a big crowd in San Francisco. If business has been down lately, this is a great chance to promote your services. Companies that have money to spend on attending our Conference probably also have money to spend on products and services. Contact us at naspp@naspp.com for more information about exhibiting or sponsoring.

NASPP “To Do” List
We have so much going on here at the NASPP that it can be hard to keep track of it all, so I keep an ongoing “to do” list for you here in my blog. 

• Register for the 17th Annual NASPP Conference. Too late! The NASPP Conference is Sold Out!
• Secure your booth in the NASPP Conference exhibit hall and your Conference sponsorship before these sell out too!
• Purchase the NASPP Conference audio.
• Renew your NASPP membership for 2010 (if you aren’t an NASPP member, join today).
• Complete this month’s Compliance-O-Meter quiz on Earnings Per Share.

– Barbara