Investigators into Cablevision Systems' use of backdated stock options have dug up a new variation on this latest form of corporate scandal: the cable TV giant granted options to a dead executive and then improperly recorded the option date to a time when he was still living. At first glance, it appears that a benevolent company simply intended to provide a nest egg for the survivors of a valued employee. That's nice. So why do it the form of stock options? Until recently, most companies did not record stock options as a business expense, so granting options had no negative impact on reported earnings. On the other hand, a company-paid death benefit is a business expense and reduces profits. And backdating the option, as Cablevision did, would hide what is, in fact, a death benefit expense.

Rather than sacrificing some profits in order to do something good, Cablevision tried to game the system and the company's credibility became a casualty. Bookmark this post on del.icio.us