The Advisors' Blog

– Broc Romanek

Here’s the intro from this Cooley blog:

A new academic study, “Rank and File Employees and the Discovery of Misreporting: The Role of Stock Options,” finds that companies that flout financial reporting rules tend to grant more stock options than their peers that adhere to those rules. Moreover, the study found that violators that granted more options to rank-and-file employees during periods when violations were ongoing were more likely to avoid whistleblowing allegations. Although it may sound cynical, the authors of the study posit the theory, as reported in this article in the WSJ, that violators may be using option grants in “an attempt to discourage whistleblowing.”