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WSJ's Murray: Even Directors Back Date Stock Options

Monday, 18 Dec 2006 | 10:41 AM ET

Another twist in the controversy over stock options. A new academic study on backdating suggests many outside directors--who are supposed to safeguard against cozy relationships with management--received manipulated grants themselves. Alan Murray is Managing Editor of The Wall Street Journal. He was on "Morning Call" to discuss the issue.

Some 29,000 grants of stock options were studied--involving about 460 companies.

Shock Options
A new academic study on backdating suggests many outside directors received manipulated grants. Alan Murray, WSJ Assistant Managing Editor, and CNBC's Michelle Caruso-Cabrera discuss the details.

It seems the study found that 9% of directors in the study--got grants of stock options--on the lowest price of the month possible. And Murray said a whopping 43% were "super lucky" in getting deals of that kind.

The study also says--a day with the lowest price of the month was more likely to be selected as a grant date than a day with the second-lowest price even when the difference between the two prices was less than one percent.

Murray pointed out that many of the "lucky" stock options were granted even after the passage of the Sarbanes-Oxley reform act. Murray says that in order to prevent this type of activity--companies need to find a way to get shareholders more involved in choosing directors for any company board.