Options back-dating probe heats up

Public pension funds are leading the attack on the corporate practice of back-dating stock options.

Several state retirement systems are involved in lawsuits against companies who have granted to their employees stock options which in some cases are priced lower than the current market value.

Calpers, the largest U.S. pension fund, plans to ask companies named in the inquiry to disclose additional details about their option-granting practices. The move comes as pension funds in Ohio and Minnesota are suing UnitedHealth Group over the pay package of its chief executive. UnitedHealth, the second-largest U.S. health insurer after WellPoint, has set up a special committee to review its stock-option grants.

At least 24 companies have said federal officials are investigating their stock-option practices, including the possibility that they deliberately moved option grants back to dates when the stock price was lower. Backdating would inflate the value of the options and shorten the amount of time executives would have to wait before claiming a profit.

"Executive pay has been one of the top issues for our members for the past few years, and this just adds fuel to the fire," said Ann Yerger, executive director of the Council of Institutional Investors in Washington. "It's a corporate atrocity that everyone is shocked by."

Public Pension News reported previously on the UnitedHealth lawsuit here.