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H-P CEO Claims He Was Not “Bullet Dodging”: On January 19, 2007, the House Committee on Energy and Commerce forwarded to the SEC a letter that H-P CEO Mark Hurd sent to the Committee in response to the Committee’s questions about his exercising of H-P options shortly before the H-P pretexting scandal broke last fall.
Although these practices involve different types of conduct, both create problems because the date when the exercise price is set is not the same as the date on which the option is awarded.
In his letter, Hurd defended the stock transactions, which took place two weeks before the pretexting scandal broke, and the same day as he was questioned by H-P’s outside counsel in connection with the internal investigation surrounding the abrupt resignation of former H-P board member Tom Perkins.
Hurd specifically wrote that “My August trade was not a case of bullet dodging.” Hurd stated that the trade was part of his regularly scheduled trading plan, established on the advice of his financial planner and broker, and consistent with the legal opinion he received from H-P’s counsel in advance of the trades.
These and other concerns are obviously the reason why many other companies are declining to reimburse executives for repriced options.
The fact that many companies have declined to make these cash payments certainly puts the companies that are making the payments in a conspicuous spot – the front page of the , for starters.
article entitled “Executives Get Bonuses As Firms Reprice Options” (here, subscription required), some of the companies ensnared in the options backdating scandal are paying cash bonuses to executives whose options are being repriced, as the option exercise price is shifted to the actual grant date from the backdated date.