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

On the first page of the first chapter of Built to Last is a quote from Hewlett-Packard cofounder William Hewlett: "As I look back on my life's work, I'm probably most proud of having helped to create a company that by virtue of its values, practices, and success has had a tremendous impact on the way companies are managed around the world. And I'm particularly proud that I'm leaving behind an ongoing organization that can live on as a role model long after I'm gone." How disappointed Hewlett would be if he were alive to see how HP's current board has disgraced the legacy he and his partner David Packard built. Clearly, HP's board is not setting the positive example Bill Hewlett had hoped.

The latest HP scandal points out a flaw in the law enacted to address corporate misbehavior. Business scandals were supposed to cease after the introduction of Sarbanes-Oxley. After all, the 2002 law gave corporation boards broad responsibility for keeping their companies on the straight and narrow. But just as foxes put in charge of guarding the henhouse can't be trusted, HP's board proved that directors need oversight, too.

A Congressional subcommittee investigating the very tactics HP's board used has called some of the company's current and former board members and executives to testify this week. Hopefully, Congress will recognize that SOX was not built to last--in other words, it's time for tougher legislation. Bookmark this post on del.icio.us

Hewlett-Packard's board chair Patricia Dunn was furious. For more than a year, someone on the HP board of directors had been leaking information to the media. Intent on identifying the mole, Dunn hired private investigators to dig into the matter. The snoops used an unsavory tactic called "pretexting" to obtain board member George Keyworth's phone records: an investigator impersonating Keyworth called his phone company and requested logs of the calls made to and from his home. Armed with phone records that listed calls to media numbers, Dunn confronted Keyworth and he admitted talking to the press. Keyworth refused to resign from the board, but HP has said it will not re-nominate him when his term expires.

This HP board uproar, the latest in a long list of them, caught the attention of California Attorney General Bill Lockyer. "I don't have a settled view on whether it was illegal yet, but it certainly was colossally stupid," he told The Associated Press. He announced that his office is launching an investigation.

HP lists its standards of business conduct on its Web site. The first standard:

Every member of the HP community (including directors, executives, managers, employees and business partners) must adhere to the highest standards of business ethics and comply with all applicable laws.

Perhaps HP's board members, especially its chair, should familiarize themselves with the company's stated values. They'll then be better equipped to live by the values they profess, and they won't look so colossally stupid. Bookmark this post on del.icio.us