“Think about it this way: Options packages don’t spring out of the ground, but must be designed and agreed upon,” adds Jenkins. “A company and its executive both have an interest in simplifying the negotiation as well as an interest in understanding clearly what the package is likely to be worth.”

“Why would backdating be appealing in this light?” he continues. “Because it lets one parameter be locked in so negotiation can focus efficiently on the other, the size of the grant. It eliminates a perverse incentive to game the stock price during the negotiation. It leaves a valued executive no reason to grump about the issue date or feel there was any invidious message in its selection, yet the company retains full control over the size of the package.”

We hope that in the coming weeks, the Journal’s reporters will take note of Jenkins column before rushing to “out” companies for accounting techniques that were widely popular in the late ’90s and which, in recent years, appear to have fallen by the wayside.

“Since Enron, a great deal has been said about corporate governance, most of it useless,” concludes Jenkins. “The one lesson that should be reinforced is that overseeing CEO incentives is among the most important board responsibilities, and boards should keep control of it and do it clearheadedly. Yet there is nothing categorically corrupt or improper about backdating to justify a conclusion that the boards here weren’t doing just that.”

We couldn’t agree more.

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