Boy, did the Business Press Maven have to up his meds when he read a recent editorial that came out in full support of backdating options. In fact, I don't think a business editorial has been more off-base since our ancestors were sharpening stones. ( Ask me sometime and I'll tell you how I really feel. )

For those of you new to the planet, backdating options is the sleazy, shortsighted, demonic practice of giving executives the best cost basis possible on options -- after the fact. In other words, Mr. Money Bags Executive does not budge his stock an inch. But he is granted options, with the issue date established (retroactively) to coincide with a low point in the stock's past.

Money for nothing, checks for free.

Well, not exactly for free. There are plenty of side costs to this slick arrangement, at least for shareholders. The practice, as it was -- uh, practiced -- was probably legal, but maybe just because no lawmaker ever had an imagination dark enough to think that people would actually do something like this (if that doesn't tell you something, I don't know what will). In any event, the Justice Department and the Securities Exchange Commission have been investigating dozens of companies, and many have acknowledged the possibility of having to restate earnings.

Apple ( AAPL), Home Depot ( HD), Microsoft ( MSFT), UnitedHealth Group ( UNH) and plenty of smaller companies such as Monster Worldwide ( MNST) and Marvell Technologies ( MRVL) have been embroiled in options-backdating controversies.

In fact, so many companies have been identified by authorities, the media or themselves as offenders (of common decency if not the letter of the law) that there is probably not much danger in any one company seeing its share price hurt for past practices -- unless civil proceedings start hurting EPS. But there may be a world of hurt for any company that attempts anything remotely like this in the future.

Here's why backdating options has high hidden costs. Options are supposed to be given for incentive. That way, the proceeds management gets its grubby hands on theoretically go hand in hand with benefit to the shareholder. If management is allowed to game the system, it does not have to build long-term value. And gaming the system takes focus. You don't want a CEO on the horn with his lawyer and accountant half the day figuring out ways to squeeze the company even more than they have.

Late this week, the options gaming got a little wackier. A commissioner of the same SEC that is investigating some of this option-pricing nutiness said that granting stock options ahead of known good news was not insider trading but a benefit to shareholders. Companies could then pay executives that way and give them less salary. This seems fanciful, if not delusional, to me. My test of fairness is always: If it would even look bad at a dog track, don't let it be legal.

Into this mountain of common sense flies The Wall Street Journal's Holman W. Jenkins Jr., whose column followed a story line the paper uses consistently (and which consistently harms shareholders): If it is done by corporate executives, it must be OK.

Where are my meds?

No one can criticize CEOs for negotiating a pay deal that benefits them, Jenkins said. But the board is corrupt for saying yes, and in fact, since the CEO works for the shareholders, any deal that causes so much potential grief is irresponsible. Jenkins also prattles on about how backdating simplifies the entire pay process. But that's like saying to shareholders: Leave your door unlocked, because that will allow you to avoid the complication of thieves breaking a window.

Anyhow, let's hope Jenkins was just starved for material and tried to make a contrarian argument of probably the only subject in the business world that lends itself to none. Jenkins, for this board-certified disservice to shareholders on such an important current topic, you get the dreaded Business Press Maven "Back of the Hand" award.

Bad, apologist, bad.

From deathly bad editorials, to the subject of death ...

Let Sleeping Kens Lay

Ken Lay, a two-bit hustler who stole more than most and was nothing at all like Horatio Alger, Michael Milken or a character in a Greek myth, died of nothing more than clogged arteries this week.

This preceding spot-on lead was written by the Business Press Maven. In the immediate wake of Lay's death, we unfortunately didn't read or hear much like it. Instead, we heard big thoughts about death, vindication, squandered talents and mortals who become tragic victims of their own success.

Being able to recognize the qualities of a small-time hustler on a big-time stage is essential to any investor who wants to avoid being had in the future. Until we start speaking honestly about when these hustlers start their hustle and how their charm is not a contradiction but a simple tool of their trade, investors are going to be left holding the bag.

One of Lay's first moves upon forming Enron was to fire all the accountants. They were not as creative and imaginative as he wanted them to be. The Financial Times' Sue Cameron -- who gets the coveted Business Press Maven "Nod of Approval" -- avoided big themes and sentiment to point this out in her obituary (albeit not quite high enough).

So was Lay, as a New York Post headline said, "Victim of His Own Success"? Listen again to that command at the very outset of Lay's forming Enron: Bring me that new accounting firm of Dewey, Cheat'em & How! This was not a man felled after a long time by a narrow tragic flaw, unless you can fit utter dishonesty into that narrow a category.

What else did we read?

After speculating that Lay died of a "broken heart" (pardon the Business Press Maven while he gags), Peggy Noonan, writing for The Wall Street Journal, draws the parallel to Shakespeare, before backing off -- if only slightly.

She then summed up with some armchair preaching: "We are human beings, and to each other we are not fully knowable. There's a lot of mystery in life. The life force can leave before we ever know it's withdrawing."

Peggy, trust me, as I read this I could feel my life force withdrawing.

If death wasn't bringing out the Bible-thumping or crocodile tears, it was doing something worse: softening better judgment. The New York Times got historically inaccurate. They said that Lay went wrong only in putting a happy face on Enron's troubles.

They refer to Lay's "wishful thinking," something we are all guilty of.

But let's set that straight. After all, while innocently telling others how great things were, the King of Wishful Thinking was also dumping stock like there was no tomorrow.

Wrote The Times: "And in the end, it was his desire to see things as he wished them to be, not as they really were, that was his fatal flaw. He never really had the judgment a good chairman or chief executive has to have."

Just the judgment of a good stock trader, God bless his heart, who sure knew when to take a profit.

Let's compare that touchy-feeliness to what Sue Cameron, that worthy recipient of the "Nod of Approval," said: "Lay told employees to talk up the Enron stock, yet he himself, who had an income of over $200 million since 1999, was busy selling his stock."

I guess one man's wishful thinking is another's pump and dump.
A journalist with a background on Wall Street, Marek Fuchs has written the County Lines column for The New York Times for the past five years. He also contributes regular breaking news and feature stories to many of the paper's other sections, including Metro, National and Sports. Fuchs was the editor-in-chief of, a financial website twice named "Best of the Web" by Forbes Magazine. He was also a stockbroker with Shearson Lehman Brothers in Manhattan and a money manager. He is currently writing a chapter for a book coming out in early 2007 on a really embarrassing subject. He lives in a loud house with three children.

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