So Microsoft, on the advice of its auditors, issued the option at the lowest price over a 30-day period.

Microsoft acknowledged doing this in 1999, stopped the practice, and restated its financials.

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A separate analysis of grants issued at other than the current price of the shares at grant also shows a pattern of manipulation, but it was only about 60% as prevalent for this type of award (these awards were not very common at the time, however, because of adverse accounting rules).

More telling, only 0.9% of the scheduled grants showed a pattern of fortuitous timing, strong proof that the pattern in unscheduled grants could not be the result of random variation.

Nejat Seyhun of the University of Michigan for the newspaper showed that that options granting practices between 20 often failed to comply with the Sarbanes-Oxley requirement that grants of awards to executives be reported within two days of board approval (T"he Dating Game: Do Managers Designate Option Grant Dates to Increase Their Compensation? Prior research at Erik Lie at the University of Iowa found a pattern of probable options backdating in a number of companies prior to 2002.

Recording the exercise as having occurred on an earlier date when the stock price was lower would minimize the executive's income tax liability, but constitutes tax fraud.

For its part, the company must report failure to comply on its annual proxy statement.

But aside from Sarbanes-Oxley, whose effective date was after most of these practices were alleged to occur, there is a raft of potential other problems: As this was written in July, the many lawsuits that inevitably will be filed against companies accused of backdating had just started.

Chances are this particular practice will now go away, but another one will surface all too soon.

As important as the issue of executive equity compensation is, it should not blind us to a more important concern.

Soon thereafter, two public pension funds in Ohio indicated they will be suing United as well, followed by a retirement fund for Pirelli Armstrong Tire.

Excessive executive compensation seems to be an issue that just won't go away because excessive executive compensation won't go away.

It's demonstrably bunk, but then the people setting executive pay operate in a parallel universe.