Summary
Molex’s recent admission to misdated stock options would seem to indicate that its corporate governance and internal controls still leave much to be desired. Accordingly, stock analysts need to seriously look beyond the metrics!
Analysis
Molex has disclosed that some of its executives will voluntarily repay $685,000 to the company to negate gains they inappropriately realized from the exercise of certain "misdated" stock options and that certain unexercised options will be corrected by raising their respective exercise prices. Martin Slark, Molex's chief executive, attributed the misdating of the options to an unidentified plan administrator merely inputting the wrong grant dates into a computer system. Given Molex’s past accounting and corporate governance transgressions, my response to Molex’s latest explanation is merely “please….”
It is fairly clear to me that Molex’s board and management leave much to be desired when it comes to corporate governance and internal controls, to put it nicely. For those not familiar with Molex, it not too long ago had to reluctantly acknowledge, only after being outed by its then auditors, Deloitte & Touche (“D&T”), to numerous accounting errors and irregularities. In that instance, Molex’s board and management also acted inappropriately, in my opinion, by not being sufficiently responsive to D&T’s repeatedly expressed concerns, ultimately resulting in D&T resigning. And, as I recall, during that accounting scandal, Molex’s board and management also attempted to merely attribute such accounting errors and irregularities to inadvertent acts or omissions by certain individuals that were subsequently reassigned within the company. However, the facts and circumstances in that instance clearly indicated to me that Molex had engaged in inappropriate earnings management on a number of fronts over a number of years. And now, with the more recent admission of backdated stock options, I have to wonder what may surface next!
