Backdating Shows Some Bite

Top management headed for the exits at two of the San Francisco Bay Area's well-known technology firms, McAfee (MFE) and CNET Networks (CNET), a clear sign that options-backdating scandals are not yet over, and that more departures may follow for firms with similar accounting problems.

While investors seemed relieved that McAfee had put its options questions to rest -- recently bidding the stock up 3.3%, or 86 cents, to $26.65 -- the news had the opposite effect for CNET -- its shares fell 6.5%, or 64 cents, to $9.26.

No doubt contributing to the divergent reactions from investors was the additional news from CNET that it was cutting its revenue guidance to $92.8 million for the third quarter. Previously, the online media firm said sales would range from $93 million to $96 million. Thomson First Call analysts polled had pegged the company for sales of $94.8 million.

Following investigations into its stock-option grant practices, McAfee fired President Kevin Weiss and announced that George Samenuk, the security-software firm's chairman, had retired. Meanwhile, CNET CEO and Chairman Shelby Bonnie resigned, along with the company's general counsel and head of human resources.

But some corporate governance watchers expect similar moves in the future.

"These are not the only companies that are going to take this action," says Jim Post, a professor of management at Boston University who teaches corporate governance and ethics for the school's MBA program. "I think this puts more pressure on the boards of other companies to be aggressive in the way they treat problems at their own companies."

"It's the tip of the iceberg," Post says.

While the likelihood that more companies could take similar actions may be unsettling to investors, it should reassure them that "boards are serious about cleaning up this mess," Post says.