Backdating and the Candyman: Where was the Human Resources Executive?

When we read about impending indictments and disbarments of generals counsel in the stock option backdating scandals, and the many more SEC investigations pending, who else in the corporate chain of command is responsible for these bad acts?

Backdating is more than gaming the system or using your position in an organization for personal gain. Backdating is a crime and SEC civil violation, which is an outgrowth of the ethical misconduct corporate compliance programs are supposed to prevent.

Let’s consider the governance in an organization and the many involved who fail to do the right thing or speak up. What was the role of the human resources executive in these cases? HR is the first to point out that they are the ones who “give out the candy” to executives, but where are these back-slappers and glad-handers now? Surely, the general counsel has a duty to counsel management on submissions to the compensation committee and the SEC and the rules of professional conduct expect the general counsel to act as gatekeeper. But the human resources executive originates these compensation plans with crafty consultants and if implicated in one of these cases, should be subject to scrutiny and barred from serving as an officer in a public company. What’s fair is fair.


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