Twenty years ago, I published a document that helped to reveal one of the biggest companies in the history of US in US history. More than 100 state -owned companies were included, dozens of executives resigned or faced criminal charges, and billions of revenue had to be repeated.
I never intended to be an informant. I just did what scientists are taught: ask questions, follow data and allow evidence to speak. However, what the evidence revealed was staggering: the executives of hundreds of companies manipulated the dates of the selection of shares with the dates of grants to enrich their leaders at the expense of shareholders. Practice became known as backward.
Now, on the 20th anniversary of this study, I see that the alarming parallels occur in other corners of the financial world.
My trip to this angle of gloomy corporate behavior began with a desire to understand how the compensation of the executive has influenced the strong decisions. Analyzing large compensation and stock price sets, I have noticed something special: shares are often coincided with with the latest stock price falls. Too often.
The model was statistically incredible. The leaders seemed to have a crystal ball, repeatedly receiving the options at the most appropriate moment. But the truth was more everyday and more worrying. The company retroactively chose the date of grants, which coincided with the low stock prices, actually recorded instantly, unpaid profits. This allowed the managers to buy shares with a discount, keeping the illusion that they had to earn a discount by raising the share price.
What cheated so insidious was his simplicity. Re -establishment did not require complex financial engineering or complex hiding. It was a silent manipulation of documents – in the past it was the date when the stock price was low and pretending that the day had been given opportunities.
This simplicity probably contributed to its spread. There is evidence that several board persons have passed in practice. However, even isolated leaders and directors could easily imagine a scheme, much like someone who supports the check to make them pay the bill on time.
I was most impressed with the fact that the back part remained unnoticed for at least a decade. It was a silent epidemic of opportunism. The data grant data was public. Thousands of participants participated. Of course, some auditors had to be seen in single traces of fraud. But no one combined points.
My study, together with time, finally encouraged the SEC to start targeted research. Watched by journalists including a command Wall Street Journal to continue history with time, resources and incentives. Their work won their first Pulitzer Prize for civil service.