Corporations faced pressures in two different directions — they wanted to attract and retain employees with attractive stock ownership opportunities offered by in the money grants, but they also wanted all the corporate advantages of making at the money option grants. The right thing to do was to pick one or the other.

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With respect to both, there are pending parallel criminal actions as well.

As most of you know, the Comverse criminal case has had a certain amount of drama surrounding former CEO Kobi Alexander, who was first a fugitive from justice, and later was located after he took up residence in Namibia, where he is presently fighting extradition to the United States.

In this regard, we identified stock options grants as a potential trouble spot several years ago — well ahead of the curve.

We examined the academic literature that quantified the potential issues.

At the same time, there was sharp rise in the overall level of executive compensation (some would say astronomical), despite the million-dollar salary deductibility cap.

In this environment, cash-strapped companies found stock options an attractive way to provide competitive compensation without further tapping their limited cash flows.

At that time, in the eighties and nineties, stock options, often in the money, were granted to employees in the hope that a highly-motivated employee pool would put the company in a better position to resist in hostile takeover battles.

Over time, shareholders objected to the fact that the options were granted in the money and eventually many companies developed stock option plans in which grants could only be made at the money — that is, at the closing price of the stock on the day of the grant.

Meanwhile other legal and regulatory developments occurred that created distinctions between in the money and at the money options.

These developments also tended to favor at the money grants.

Taking a very different tack, Comverse's former CFO, David Kreinberg, last week became the first top level executive to settle actions brought by the SEC and the US Attorneys' Office since options backdating came into the media spotlight last Spring.