Nabors to Reinvestigate Stock Option Accounting
Nabors Industries Ltd. (NBR) said Dec. 27 that it plans to reinvestigate its stock option granting practices, after a news report mentioned the oil-services company's methods as an example of how some executives are getting lavishly paid.
Stock option accounting has been a hot topic in recent months, touching hundreds of companies and leading some to oust top executives or restate their financial results.
When Nabors CEO Eugene Isenberg's stock fell below the price at which his options could be exercised, temporarily making them worthless, Nabors let him trade in some of his options for new ones with lower exercise prices, The Wall Street Journal reported on Dec. 27. And when Mr. Isenberg cashed some options in, Nabors "reloaded" him, replacing those he'd exercised with the same number of new ones, the WSJ said.
Some of CEO Eugene Isenberg's "option grants appear to raise questions about how they were dated," according to the article. A number of them came on days when the stock hit its lowest close for the month or the quarter. At other companies, a series of low-price grants has been a pattern that has suggested possible dating problems. At the least, the favorable grant dates added to Mr. Isenberg's mammoth options gains. His employer has lavished more than 25 million options on him over the years, the WSJ said.
The newspaper mentioned Nabors as an example of how stock options have fueled runaway executive pay, not as the focus of an investigative piece into the company's accounting.
"As a result of issues raised in today's Wall Street Journal article, the Company is initiating a further review of its option granting practices," Nabors said in a press release Dec. 27.
The Bermuda incorporated company had already done a "precautionary internal review" earlier this year of its stock option practices extending back to 1998, Nabors said. But the company did not see any reason to question the propriety of its option granting practices.
Investors bid up Nabors' stock 0.8% to $30.48 in early afternoon trading on the New York Stock Exchange.