Home Depot Inc., the world's largest home-improvement retailer, said it ``routinely'' backdated option grants to benefit employees for 19 years and had unrecorded expenses of about $200 million related to past practices.
The company's five-month internal probe, which found no evidence of ``intentional wrongdoing'' by company managers or its board, discovered several errors on how the company handled option grants dating back to 1981, Atlanta-based Home Depot said today in a statement.
The retailer is among more than 160 companies that have disclosed government or internal probes into whether it inflated the value of options by retroactively granting them on dates when their stocks were trading lower, according to data compiled by Bloomberg. That made the options worth more than if they had been approved on the grant date.
``It's impossible to state how pervasive the backdating issue is across all of corporate America, but the Home Depot announcement clearly indicates that it's not just a Silicon Valley problem,'' said Mark Edwards, a compensation specialist for Compensia Inc.
There is never any intentional wrongdoing in these matters; it's always an "accident" of some sort. Somehow I bet the executives who benefited hit the grants literally hit the lotto on their option grants.
The person who originally discovered this problem did a statistical analysis of option grants for the last 5 years. He described the timing of the grants as the option lotto, which is where that term above comes from.
Also, let's look at two other points from the article. First, the option grants were $200 million worth since 1981. That's a lot of money, even though it's spread over 20+ years.
Secondly, this quote should cause concern: "It's impossible to state how pervasive the backdating issue is across all of corporate America, but the Home Depot announcement clearly indicates that it's not just a Silicon Valley problem,''
Somehow I think that is the understatement of the year. I think we are going to find a large number of grants like this as the SEC combs through corporate records.