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June 15, 2006 / Toby Dayton

Monster Under Investigation For Questionable Options Practices

It was reported this week that Monster Worldwide has become a target in the ever-widening scandal involving companies that have backdated options grants to senior executives. Stock options, which give the recipient the right to buy shares of stock at a set price or ‘strike price,’ are granted to reward employees when the company’s share prices rises in the future. If an option is backdated, the recipient receives the benefit of 20/20 hindsight vision because the strike price would be artificially low, thereby assuring that the options were ‘in the money.’

In the case of Monster, for example, an option granted to a senior executive in 2001 was dated April 4th, the low-water mark for Monster’s stock price in the first half of 2001. The stock climbed 67% in the subsequent 20 trading days following that date. The Wall Street Journal, in examining the odds that Monster’s option grants were random, determined that the odds of picking the lowest share price across the series of grants in question were 9,000,000 to 1. I think it’s a pretty safe bet that Monster is guilty of backdating their option grants.

In one of the most ridiculous quotes ever by a senior executive, the Monster executive who received the options claimed he was unaware of the fortuitous dates of the options grants, stating in the Wall Street Journal article, “I was busy working and there was a lot to do and there were a lot of moving parts and a family to get home to.” We’ll see if playing the family-man card helps at all with the SEC.

tags]Monster, Options Backdating, Options Scandal, Egregious Executive Compensation, CEO Pay, Corporate Fraud, White-Collar Crime, Job Boards, Long Jail Sentences, Options, Stock Options, Wall Street Journal[/tags]