Human Capital & Careers

Options Grants Probed at Chip Maker

Analog Devices admited to granting stock options "shortly" before issuing favorable financial results.
Stephen TaubDecember 3, 2004

Analog Devices Inc. said the SEC has launched an inquiry of the company’s granting of stock options to officers and directors over the last five years .

The maker of analog microchips said in a regulatory filing that it believes other companies have received similar inquiries.

The company, which said it will cooperate with the SEC, admitted in the filing that it granted stock options to a broad base of employees, including officers and directors, and in some years those grants have occurred shortly before the company issued “favorable annual financial results.”

Back in March, the Wall Street Journal reported that the SEC was looking into the practice at a number of companies, especially those in technology industry, of granting options shortly before announced positive news.

Maria Tagliaferro, an Analog representative, told the paper the timing of the two events is irrelevant since the options don’t vest for at least three years from their grant date. “What happens to the stock price in the day, the hour, the year the option is granted is not relevant to that option,” she reportedly said. “The stock price only becomes relevant after that option has vested.”

The Analog probe comes at a time when the practice of providing options to employees seems to be waning. A major reason is that the Financial Accounting Standards Board is scheduled to require companies to expense the value of stock options beginning in mid-June. In anticipation of this development, an increasing number of companies have been scaling back the use of options as a form of compensation, moving more into granting restricted stock.