WSJ: After 9/11 as stocks sank, scores of US firms rushed to give millions in options to top execs

Published: Saturday July 15, 2006

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After 9/11 as stocks sank, scores of US firms gave millions in options to top executives, reports the Wall Street Journal on the front page of Saturday's paper.

The paper asks, "Did companies take unseemly advantage of a national tragedy?"

"A review of Standard & Poor's ExecuComp data for 1,800 leading companies indicates that from Sept. 17, 2001, through the end of the month, 511 top executives at 186 of these companies got stock-option grants," reports the Wall Street Journal.

One former stock-option-committee member for a Michigan firm defends the giveaways to the Wall Street Journal.

"If you believe the company is going to do well, and here is an external event that is affecting the market and you've made a decision to reward executives, you go ahead with it," John Lillard told the Wall Street Journal.

"Life goes on," Lillard added.

Excerpts from the article written by Charles Forelle, James Bandler and Mark Maremont:


Ninety-one companies that didn't regularly grant stock options in September did so in the first two weeks of trading after the terror attack. Their grants were concentrated around Sept. 21, when the market reached its post-attack low. They were worth about $325 million when granted, based on a standard method of valuing stock options.

The 91 companies included such corporate icons as Home Depot Inc., Black & Decker Corp. and UnitedHealth Group Inc. It included two companies directly touched by the tragedy. Merrill Lynch & Co., across the street from the Twin Towers, lost three employees. On Sept. 24, Merrill granted its president options to buy more than 750,000 shares, at a price 15% below the pre-attack level. At Teradyne Inc. in Boston, an employee delayed a business trip until Sept. 11 to attend a son's soccer game and died on American Flight 11. Teradyne that month gave its CEO more than 600,000 options at a price enabling him to buy stock at 24% below its pre-attack level.

There's nothing illegal about granting options after the market plunges. But acting so quickly after a national tragedy drove down stocks shows the eagerness of some companies to increase their executives' potential wealth. These grants also offer important new fodder for an already fractious debate over what constitutes the proper use of options in executive compensation.