Mercury interactive backdating
STRATEGY: To achieve these objectives, Ogilvy PR developed communications plans to execute the following strategies: RESEARCH/PLANNING: To determine the best strategies for handling the crisis, Ogilvy PR researched other technology companies that have gone through financial crises, including Computer Associates, Brocade and Oracle.
The research was critical in convincing Mercury executives to use "moving forward" messaging, overcoming their initial plans to promote a "comeback" story.
The article described how the company’s executives received stock option grants in 2001 on "unusually fortunate days." The article also said that the data the Journal reviewed suggested a "highly improbable pattern of option grants." The company’s shares dropped over ten percent on the news, representing a drop in market capitalization of 5 million.
On May 24, 2006, the company announced (here) that its Board of Directors had formed a special committee to investigate the company’s stock option practices between 19.
Without proper communications management, the scandal could have caused lasting damage to the corporate brand, abandonment by customers, shattered employee morale and loss of key employees.
OBJECTIVES: Campaign objectives included: It would be crucial to launch a successful communications campaign that portrayed Mercury as a company with strong products, earnings and customers to quell the concern and skepticism of each of these groups.
The magnitude of the KLA-Tencor settlement may be a reflection of the prominence of the case (in light of the article), the magnitude of the stock drop (many other options backdating cases do not involve a significant stock price drop), and the existence and apparent seriousness of the SEC complaint, as well as the company’s public admissions about the backdating and its termination of Schoeder and others.
Mercury was one of the first companies to announce a Securities and Exchange Commission (SEC) investigation into backdated stock options.In my reference checking, at least a dozen investors told me that they made far more money when the numbers disappointed than when the company outperformed, because they trusted Michelle when she said that things were not worse than they appeared and bought on the dips.Once she came on board, Michelle rapidly reviewed all of our practices and processes to make sure we were both compliant and competitive.In any event, I have added the KLA-Tencor settlement to my table of options backdating settlements, dismissals and denials, which may be accessed here.“Why I Did Not Go To Jail” Michelle (note: her name has been changed) comprehensively understood software accounting, business models, and best practices, and she was beloved by Wall Street in no small part due to her honest and straightforward reporting of her previous company’s business.