President Bush’s Uncle Bucky benefited from stock options illegally backdated by executives of defense contractor ESSI. Stock options are a popular “pay for performance” component of executive and board compensation packages and have been in widespread use for twelve years. Backdating stock options helps maximize returns under this system but usually is in violation of the company’s policy on handling stock options. This turns the practice into a Securities and Exchange Commission violation at the least.
Of 2,000 publicly traded companies employing the practice, the SEC has been investigating some 200. One of those 200 led to William H.T. (Bucky) Bush’s door. As a director, the President’s Uncle likely did not initiate the scheme. However he personally benefited at stockholder’s expense. Not only did ESSI executives manipulate the timing of grants, they exceeded the maximum allowed under the program. This gave board members some $6 million in extra compensation.
While many are appalled at a Presidential relative benefiting from an illegal action, most should be concerned about the distortions pay for performance put into business, educational or health care systems. The same widespread cheating seen after 12 years of corporate use should show up in public education via No Child Left Behind. Medicare plans on instituting “pay for performance” in the very near future.
Look for future Bush relatives making money hand over fist in education companies and health insurers. Ooopss! Uncle Bucky already sits on the board of WellPoint, a huge health insurance company. What's a half million here or there when you are a Bush?