'I obviously don’t know what happened at the other company, but I do know that Michelle had no intention of breaking any laws and no idea that she’d broken any laws'
This. This is terrifying. We're already in the position, as a society, that everyone is guilty of something, and it's just whether someone feels like prosecuting you or not as to whether you'll be penalized.
It's somewhat of a departure from say, 50 years ago in the United States of America. Options are a substitute for salary. Options were invented when executive salaries were deemed too high.
Now a detail in compensation practice will get you three-plus months in jail.
Now a detail in compensation practice will get you three-plus months in jail
How is it merely a "detail"?
If, on March 31 of a given year, you hand someone a stock option, you don't get to pick "today" as the lowest price the stock has had in the interval of March 1 thru March 31.
That's not a "detail". That's not just a small problem with the paperwork. That's nothing but obvious fraud.
IMO. IANAL. But I've had stock options given to me. And the price was set for that day, not for some date that was clearly a lie. And this all happened 20+ years ago, long before these sordid SV practices came to light.
Edit: One time my stock option grant was worse than "today". What happened is we were a small company, the BOD met a few days earlier and approved grants, my manager didn't give me my grant for a few days. So it was something like this:
manager: "Here's your stock grant for $20 a share".
me: "but the stock closed today at $18 a share. So I'm already 10% underwater".
Such were the perils of working at a small company that wasn't trying to game the system.
Not that there weren't ways to change employee compensation. In 2009 (and I'm sure at various dates before that), many companies went to their stockholders to ask them to approve re-pricing because employee options were way under water.
I don't recall the converse ever happening. I'd like to hear of a company going to its stockholders and asking for approval to tear up grants in the other direction. Something like this: "we gave out employees stock options at $10, but the stock is now $30. We want to take back those grants and give them new ones at the current price". Nope, that doesn't happen.
I.e. there are already many ways companies can legally "cheat" without having to commit obvious fraud.
> I told our employees that there was a difference between accounting fraud and accounting mistakes and I believed that Michelle made mistakes at her previous company, but did not commit fraud. [...]
> Michelle ultimately served 3½ months in jail for her part in the other company’s stock option practice—the same practice that we nearly implemented at Opsware. Since we had the same head of finance, we almost certainly would have been investigated. I obviously don’t know what happened at the other company, but I do know that Michelle had no intention of breaking any laws and no idea that she’d broken any laws. The whole thing was a case of the old saying: “When the paddy wagon pulls up to the house of ill repute, it doesn’t matter what you are doing. Everybody goes to jail.” Once the SEC decided that most technology company stock option procedures were not as desired, the jail sentences were handed out arbitrarily.
In England it would be unusual to go to jail unless there was intent to deceive. People don't go to jail because they've made a mistake in their accounts.
Is that true for the US? Or is this story an example of the massive over-incarceration the US has?
So, I'm not trying to say they wouldn't be found guilty of an offence. I'm saying that they wouldn't go to jail unless there was recklessness or intent to deceive.
For a tax offence this would mean they'd have to repay the tax, with some penalty. Non-payment would then result in a prison sentence.
Wasn't it her job to at least know where the gray areas where? If you know you're in a gray area, I'd expect you know that you _might_ be breaking the law.
The point of the story is that social proof isn't enough when it comes to legal matters. The author contrasts his behavior with Michelle's to point out what can happen when you use social proof rather than direct legal advice.
From what I can understand from the post, Michelle's plan was reviewed by PwC with no findings. So I guess she believed that the gray areas were clarified.
This. This is terrifying. We're already in the position, as a society, that everyone is guilty of something, and it's just whether someone feels like prosecuting you or not as to whether you'll be penalized.