Michaels Finds Possible Options Discrepancies

Choosing a different date for the exercise price that falls sometime before the options were approved can remove that incentive, particularly if the chosen date falls on a day when the stock hit a historic low. That practice, which has given rise to the recent scandal, is essentially stealing money from other shareholders because the automatic value assigned to the options dilutes the value of other outstanding shares when they're exercised. Since such misconduct requires cooperation between the recipient of the options and the directors approving the options, it raises ethical questions along with legal, accounting and tax problems for a company.

Shares of Michaels closed down $1.29, or 3.4%, to $36.18 on Tuesday.