Skip to Content
Stock Strategist

Why Some Corporate Boards Fail Investors

Among management blunders, option backdating is only the tip of the iceberg.

Mentioned: , , , ,

As you might recall from our last article on corporate governance, the actions of a company's management team, as well as its board of directors, can have a significant impact on investor returns. While it is usually calamities like Enron and WorldCom that grab the headlines, more commonplace missteps like poor decisions in the executive suite (or rubber-stamp oversight by supposedly independent directors) can erode shareholder value in the long term.

How Backdating Hurts Investors
The recent option backdating scandal is probably the most egregious form of management misconduct we've seen since Enron and WorldCom--officers at these companies were basically stealing money from their shareholders with the board's approval. At this point, more than 100 companies are under investigation for option backdating, and more than 50 corporate executives have lost their jobs (either through termination or resignation) since the stock option scandal burst into the spotlight earlier this year.

Greggory Warren does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.