ON Securities

I attended a compelling legal education program this week, taught by Egil “Bud” Krogh. Political junkies know that Krogh was a young assistant White House counsel in the Nixon years. As a leader of the “Plumbers” unit, he authorized the 1971 break-in of the offices of Daniel Ellsberg’s psychiatrist after the leak of the Pentagon Papers. After the break-in came to light in the Watergate hearings, Krogh pleaded guilty, served time in prison, was disbarred and later reinstated. Bud now lectures on the topic of legal ethics, based on his recent book, Integrity: Good People, Bad Choices, and Life Lessons from the White House. His premise: in a pressure-filled environment such as the White House, intense loyalty to individuals can blind you to your higher principles. . . . . Krogh’s description of an environment that can put pressure on decision-making is familiar to anyone called on to say yes or no to any proposal by a corporate officer. . . . [H]ow do some decisions, even decisions by good people, go astray? A great example can be found in the options backdating scandals. . . . I asked Krogh how to advise an attorney . . . how to avoid the pitfalls of losing perspective in a pressure-filled situation . . . . [to read more, click on the link above]

A story in the Wall Street Journal last week . . . described an interesting recent academic study on stock options backdating. The study found that several hundred companies that improperly backdated options never were caught or confessed. . . . The legacy of the backdating scandal lives on in the SEC’s compensation disclosure rules that became effective in 2006. . . . We recommend that public companies adopt a written stock option grant policy . . . . [to read more, click on the link above]