Lights, Camera, Action! SEC Backdating Investigations Show Continued Period of Focused Regulatory Action

The volume of backdating actions suggest we are emerging from a period where many corporate executives were allowed to game the system for personal gain. There should be lessons learned and corrections made to the way corporations are permitted to govern through regulatory actions and common law rulings like we saw from the Delaware Chancery Court law week, where the court allowed a derivative suit to go foward against outside directors for allege failure to discharge oversight duties in backdating abuses at Brocade Communications.

Hopefully these lessons will result in better and more objective systems of self-governance and compliance in public corporations. The heart of solution lies in the presence of corporate cultures that encourage ethical conduct and compliance with law. Organizations will be able to have effective ethics and compliance programs, and prevent unchecked, self-dealing, if the function ultimately reports to an independent committee of the board of directors.

In the latest, reports indicate the SEC expanded its investigation of Steve Jobs and his handling of stock options grants issued at Apple. The inquiry has been extended to include grants he authorized while a senior executive at Pixar in 2001. For more on this story, see The Times Online.

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