Study: Options Backdating Spread Via Director Network

October 19, 2006 ( - The notion of backdating stock options was apparently spread across the corporate landscape like a virus - through contacts by a director sitting on more than one board.

A news release said that was a key conclusion of the recent survey of 120 companies by The Corporate Library as part of its study of the recent scandal over allegations a variety of companies deliberately backdated their options (See  Study Finds Options Backdating a Common Practice ).

The number of companies implicated in the scandal has more than doubled since The Corporate Library’s first report on this subject, rising from 51 at the end of June 2006 to 120 companies at the end of September 2006, according to the announcement.

At the same time, according to the survey, the number of companies with directors sitting on the boards of other companies implicated in the scandal has risen almost five times, from 11 to 51. The most important relationships involve several directors who served on boards prior to 2002, when most backdating activity occurred, and continue to serve now, The Corporate Library said.

“Director interlocking relationships now appear to be the most important governance characteristic and indicator of backdating problems,” researchers asserted in the announcement.

The report is available for purchase  here .