Administration December 11, 2006

Home Depot Discloses 19 Years of Options Backdating

December 11, 2006 (PLANSPONSOR.com) - Home Depot Inc. said last week a review by outside counsel found, for certain stock option grants from 1981 through November 2000, the stated grant date was earlier than the actual grant approval date.
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Reuters reports the disclosure could result in more shareholder scrutiny for the company, which has been under attack in the past year concerning excessive executive pay (See Corporate Excessive Pay Activists Win Strong Home Depot Support ). In August, Home Depot announced shareholder lawsuits tied to stock option practices.

The erroneous grant dates resulted in unrecorded expenses of about $200 million, Home Depot said, according to Reuters. However, t he company said its review found no wrongdoing by current management or board members, and the financial impact tied to the accounting errors would probably not harm the company.

Home Depot faces fines and injunctions from the Securities and Exchange Commission (SEC) if it believes there was misconduct, and the Justice Department could bring criminal charges against the company or persons involved. However, “[t]he real issue is the qualitative materiality or reputational damage involved,” said Nicholas Unkovic, a corporate and securities lawyer with Squire, Sanders & Dempsey, in the news report.

The stock options scandal, which some claim is bigger than the mutual fund scandal started by the Enron debacle, has resulted in shareholder lawsuits, criminal charges, and resignations or dismissals of executives and board members at a number of companies (See Corporate Carnage Continues in Stock Options Scandal with Monster Firing ).

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