Many companies exploited the 9/11 market decline to issue more stock options to their executives than they had during comparable periods in years past, according to a good piece of reporting in The Wall Street Journal.

You can read the full report, Executive Pay: The 9/11 Factor, here.

According to the WSJ, a review of Standard & Poor's ExecuComp data for 1,800 leading companies found that from Sept. 17, 2001, through the end of the month, the number who received grants was 2.6 times as many as in the same stretch of September in 2000, and more than twice as many as in the like period in any other year between 1999 and 2003.

It also included 91 companies who did not regularly grant stock options in September, including Home Depot, Black & Decker Corp. and UnitedHealth Group Inc. Not to mention two companies that had lost employees in the terrorist attacks, Merrill Lynch and Teradyne.

People will remember that when the market re-opened for trading on September 17, 2001, the market fell 14 per cent and recorded its worst week in more than 60 years. So the options were dirt cheap.

While the companies deny they were exploiting the tragedy, the WSJ correctly points out that it does raise some obvious questions, particularly in the context of the investigations now going on into the backdating of options and potentially illegal pay practices.

Still, there might be an upside for investors in all this brouhaha over options.


As Rick Green and Graef Crystal from Bloomberg point out in this report, buying shares in a company as soon as it issues stock options to its CEO is a smart move.

As Byron Wien, chief investment strategist at Pequot Capital Management in New York put it: "If these grants are a heads-up that a stock will rise, then investors should pay attention."