ISS today released its 2007 Board Practices, Board Pay Study, a report that examines the board structure and compensation of boards of directors at S&P 1500 companies based on 2006 disclosures. The most significant study finding was that the proportion of S&P 500 companies with classified boards dropped dramatically by 8 percentage points. This led, for the first time, to a majority of these companies holding annual elections for all of their directors.

To learn more about the findings from the study, please listen to ISS' Governance Leadership Interview with Carol Bowie, Vice President of Governance Research Services.

At the Jan. 19 annual meeting of German steelmaker ThyssenKrupp, shareholders approved an article amendment that gives the Alfried Krupp von Bohlen und Halbach Foundation (Krupp Foundation) the right to appoint three out of the 10 supervisory board members elected by shareholders.

The foundation, which was set up by the founder of a predecessor company, is ThyssenKrupp's largest investor, and recently increased its stake to 25.1 percent. The direct appointment of foundation representatives will bypass the traditional director election process.

If the three foundation appointees join forces with the 10 members who are elected by employees, they would outnumber the seven members who will continue to be elected by outside shareholders. Against the background of a rapidly consolidating steel industry dominated by emerging-market players, some analysts see this as a defensive measure to protect the company against hostile takeovers.

The story has taken on added significance because the chairman of ThyssenKrupp's supervisory board, Gerhard Cromme, who defended the measure in front of angry shareholders attending the annual meeting, is also the head of the government commission that created the German Corporate Governance Code (Kodex). According to provisions of the Kodex, it is the general meeting that should elect shareholder representatives on the supervisory board, and those members should represent the interests of all shareholders. Those critical of Cromme's support for the change also point to his role as CEO of ThyssenKrupp until 2001 and longstanding close ties to the Krupp Foundation.

In defending the move, Cromme argued that giving the Krupp Foundation the right to appoint supervisory board members would actually improve transparency, one of the main aims of good governance, by clearly disclosing the foundation representatives' allegiance.

Cromme also sits on the supervisory board of Siemens, which is under criminal investigation by the state attorney's office in Munich in a bribery scandal involving 420 million Euros ($557 million) of payments under review. A large number of shareholders were expected to vote against the annual management proposal to absolve the management and supervisory boards from liability for their actions at Siemens' Jan. 25 annual meeting.

The controversial ThyssenKrupp resolution received 289.8 million votes in favor, or 78.9 percent of votes cast, according to a company press release. Press reports indicated that a number of large German investors voted with ThyssenKrupp management for fear of upsetting Cromme, who sits on nine German supervisory boards.

Vereinigung Institutionelle Privatanleger (VIP), a German association of shareholders, filed a counterproposal opposing the measure. According to Hans Buhlmann, head of VIP, the measure is "a poison pill, which can only be removed by a three-quarters majority vote." However, shareholders voting by proxy were not able to vote on the counterproposal because of the compan's procedural rules.

Some industry observers, including Dieter Fockenbrock of the German-language daily Handelsblatt, expressed concern that the ThyssenKrupp vote will set a precedent whereby other large shareholders will try to enshrine their representation on German supervisory boards. One example is Porsche, which owns a 29.1 percent stake in Volkswagen, and has openly called for more influence at the German carmaker.

The following is the text of the Jan. 19 comment letter that ISS sent to the Securities and Exchange Commission on proxy access.

We are writing to reiterate ISS' support for shareholder access to the corporate proxy ballot for the purpose of director nominations. This statement represents the views of ISS and not necessarily those of our clients. We urge the Securities and Exchange Commission to complete consideration and adopt a proxy access rule. Meanwhile, we believe that shareholders should have the right to place proxy access resolutions on corporate ballots. Such resolutions will stimulate constructive discussion and will subject the idea to a series of market tests on a company-by-company basis.

Shareholder proposals on proxy access will facilitate private ordering by enabling investors to consider what is right for individual companies. Shareholders already have the right to submit proposals and to vote on other matters concerning procedures of director elections, including declassified boards, cumulative voting, and majority voting. It would be logical and consistent to include shareholder proposals on proxy access among the topics protected from ballot exclusion.

In our Dec. 18, 2003, comment letter, we explained our support for the SEC's proposed rule on security holder director nominations. We believe that the considerations discussed in that letter remain equally valid today. Providing eligible investors with reasonable access to place their nominees on corporate proxy ballots will improve the performance of boards and boost the confidence of investors in corporations. While nearly all the reforms adopted in the past five years enhance boardroom oversight of management, ballot access will enable shareholders to hold directors more accountable.

Since 2003, as proxy access reforms stalled, many shareholders have shifted their focus to the voting standard for director elections. Shareholders and companies increasingly have come to accept majority voting in director elections as a democratic reform that transforms board elections from the symbolic to the meaningful. Nonetheless, there are clear distinctions between majority voting and proxy access--and we believe both reforms are needed. Majority election standards enable shareholders to vote directors out of office or to prevent nominees from assuming office. In this sense, majority voting can be likened to a limited form of veto. Proxy access, on the other hand, gives eligible shareholders the right to nominate one or more directors to the board. In this way, proxy access enables shareholders to make a positive contribution in building the board. The two reforms, far from being mutually exclusive, are complementary. They share the common aim of making boards more accountable.

In our 2003 letter, we took issue with the contention of opponents of ballot access that shareholders would allow themselves to be stampeded by special-interest groups. We are confident that a proxy access rule--such as the one proposed by the SEC--will contain numerous safeguards to prevent any abuses by special-interest groups. Moreover, proxy voting behavior by institutional investors shows that the rhetoric of critics is not in line with reality. In our decades of experience with institutional investors, we have found that the vast majority of them approach corporate governance issues in a thoughtful manner to build value for themselves and their portfolio companies. We believe that investors will apply that same thoughtful process to proxy access, should the SEC provide them with this important governance tool. It is a tool that will enable investors to fulfill their ownership responsibilities while improving board accountability.

A criminal trial over the collapse of Switzerland's national air carrier, which began this week in a Zurich suburb, may help define the extent to which Swiss boards can be held accountable by investors and stakeholders.

Most shareholders of SAirGroup, the holding company for Swissair, have long written off their investment after the corporate icon went bankrupt in October 2001. However, the trial may set an important precedent regarding the liability of directors and executives over what ended up as the country's largest corporate collapse--estimated at CHF 17 billion ($13.6 billion).

Nineteen former directors, executives, and outside advisors are on trial on charges that they breached their fiduciary duties by granting fraudulent authorizations, making false reports, and committing personal income tax fraud, among other crimes.

After originally being rejected by a court as too broad, the case was re-filed in July 2006 by the office of the state prosecutor for financial crimes for the Canton of Zurich. The office has set up a separate team focused exclusively on investigating the circumstances surrounding Swissair's collapse.

The current criminal case is the result of only the first half of the team's investigation. Prosecutors expect to file a second criminal case based on violations of accounting rules, at the earliest in the second half of the year. According to Bloomberg News, the trial is the first time that outside directors have faced criminal charges for their involvement in a Swiss corporation's failure.

The list of defendants reads like a who's who of Swiss industry. Those being prosecuted include Mario Corti, a former CFO of food multinational Nestlé; Eric Honegger, a former director of Swiss banking giant UBS and former government official for the Canton of Zurich; Lukas Muehlemann, a former CEO of both Credit Suisse and insurer Swiss Re; and Thomas Schmidheiny, the former chairman and CEO of cement conglomerate Holcim.

Because of the precedent-setting nature of the trial and the stature of those targeted, commentators have compared the proceedings to Germany's Mannesmann trial, in which Josef Ackermann, the powerful chairman of Deutsche Bank, and other members of Mannesmann's supervisory board, were accused of illegally approving payments made to Mannesmann executives during a 2000 buyout by Britain's Vodafone. That trial had wide-ranging implications for the German market and helped spur best practice regulations including those to improve pay disclosure.

Germany's Lufthansa agreed to buy Swiss International Air Lines, Swissair's successor airline, in 2005. However, Karl Wuethrich, the liquidator appointed to oversee the winding up of SAirGroup, has filed a number of civil proceedings to recover damages on behalf of former creditors and shareholders, in parallel with the criminal case now underway.

While the Securities and Exchange Commission approved new executive pay disclosure rules in July, investors are continuing their efforts to seek additional reforms at U.S. companies.

From the proposal filings so far, it appears that investors have sharpened their interest in pay disclosure and giving shareholders a greater voice over compensation decisions. This interest has been fueled in part by the stock-option timing scandal that led to internal or regulatory probes at more than 150 firms, as well as investor anger over generous packages for departing chief executives, such as Home Depot's Robert Nardelli.

Moreover, lawmakers who traditionally have advocated for greater curbs on executive pay now have a greater voice following the November elections, when control of the House Financial Services and the Senate Banking and Finance Committees shifted to the Democrats. (This week, the Senate Finance Committee approved a bill that targets a tax break received by hundreds of top corporate executives. The measure, which is attached to popular minimum-wage legislation, would bar individual taxpayers from deferring more than $1 million a year in compensation.)

One set of compensation-related proposals in 2007 likely to receive considerable attention are those seeking to give investors the right to approve compensation practices. In 2006, the American Federation of State, County, and Municipal Employees (AFSCME) filed the first U.S. proposal seeking a non-binding referendum on compensation. That proposal averaged 39.9 percent support at seven firms last year. The resolution was patterned on similar measures in the United Kingdom, Australia, and Sweden.

A growing number of investors are joining AFSCME's campaign by submitting similar proposals, dubbed "say on pay." ISS is now tracking 35 proposals filed by labor funds, and an additional 20 by other institutional investors and individual activists, including some funds that have traditionally focused on social issue advocacy. The California Public Employees' Retirement System (CalPERS) has filed such a proposal at technology company EMC, and fund officials indicate more may be filed.

The language in some of these proposals has changed slightly from that used in 2006 to reflect modifications to the SEC's pay disclosure rules. The new version of the proposal asks that shareholders be given the opportunity at each annual meeting "to ratify the compensation of the named executive officers set forth in the proxy statement summary compensation table and the accompanying narrative disclosure of material factors provided to understanding the summary compensation table (but not the compensation discussion and analysis)."

Executive pay issues dominated the 2006 Australian proxy season, the second year in which investors had the opportunity to cast an advisory vote on company remuneration reports.

In Australia, the highest profile annual general meeting was at telecommunications giant Telstra, where two issues dominated: the company's new executive pay practices and the successful attempt by the Australian government to install its board nominee, Geoff Cousins, despite 88 percent of non-government shareholders voting against his election. The vote was the state's last opportunity to exercise its majority voting power before it reduced its stake in November.

Telstra's board was also forced to rely on the government's 51-percent majority stake to ensure passage of a resolution approving the company's remuneration report. Fifty percent of minority shareholders voted against the resolution, citing concerns over the nature of executive performance hurdles, the level of bonus payments, given the company's poor performance and the low hurdles applied to incentives granted to the CEO.

No other annual meeting generated the same level of press coverage as Telstra, although high dissenting votes were recorded at a number of other meetings. Australian gambling company Tabcorp withdrew two resolutions, one concerning a proposed constitutional amendment that would have required a 75-day notice period for director nominations, and another concerning a grant of options to its CEO. Despite increasing the performance hurdles for the CEO option grant three days before the meeting, Tabcorp was forced to withdraw its resolution after a reported 60 percent of proxies were cast against it.

Other high votes against were recorded at meetings of both small and large mining companies, stemming from significant pay increases that have come in the wake of the global commodities boom.

Two small resources companies, Beach Petroleum and Kagara Zinc, recorded "no" votes of more than 20 percent and 30 percent, respectively, against option grants and other pay-related resolutions after substantial salary increases and option grants saw executives and directors at both companies profit handsomely from their companies' rocketing share prices over the past year.

Similarly, major global zinc and lead producer Zinifex recorded a 40-percent against vote on its remuneration report after increasing the pay package of its CEO by 100 percent despite the CEO holding over $20 million in vested and unvested equity incentives.

As of Jan. 1, ISS is tracking almost 450 governance-related shareholder resolutions for the 2007 proxy season. The issue of majority voting in director elections will again feature prominently, based on the number of proposals filed to date as well as momentum gained from support of such measures in recent years.

However, companies have shown an increased willingness to adopt majority voting bylaws and policies, prompting several union pension funds to withdraw resolutions and actively engage with other issuers to reach agreements. In the past six weeks, more than 25 firms have adopted majority voting or announced plans to do so.

In addition, proxy access--the proposed, tabled, litigated, and much-debated suggestion that shareholders meeting certain requirements be allowed to nominate a limited number of corporate directors--will likely appear on a few proxies this year after the American Federation of State, County, and Municipal Employees (AFSCME) successfully challenged the exclusion of an access proposal.

The topic that dominated last year's proxy season--calls for director elections by majority vote--will likely feature just as prominently in 2007. In 2005 and 2006, activist investors pushed for companies to allow for majority voting after the SEC abandoned a 2003 draft rule designed to give investors greater say over director nominations.

Since then, activist shareholders have become so focused on gaining more influence over corporate boards that the most frequently filed proposals last season and in 2005 were those asking boards to provide that director nominees in uncontested elections be elected by "the affirmative vote of the majority of votes cast at an annual meeting of shareholders."

According to ISS records, shareholders filed 84 majority election proposals that came to a vote in the first half of 2006. This compares with 54 proposals that came to a vote in the first six months of 2005, and 12 in 2004. For the first half of 2006, shareholder support for these majority vote proposals averaged 47.7 percent (compared with 44.3 percent during the first half of 2005). And by August 2006, 36 proposals had received more than 50 percent support, nearly triple the number in 2005. In 2004, these proposals averaged less than 12 percent of votes in favor, without a single proposal winning a majority.

Building trades funds led by the pension fund for the United Brotherhood of Carpenters and Joiners of America filed most majority vote proposals in 2005 and 2006. And labor funds, such as the Carpenters, will again spearhead efforts on this issue in 2007, having so far filed roughly 100 such proposals, with an additional 10 submitted by individual investors.

The Securities and Exchange Commission staff has rebuffed a request by Hewlett-Packard to omit an investor proposal that seeks a bylaw or charter amendment to require a shareholder vote on any future "poison pill" takeover defense.

The binding proposal was filed by shareholder Nick Rossi, who argues that it would "improve the lack of accountability" on the company's board. H-P's board was criticized by some institutional investors and lawmakers after the firm disclosed a boardroom leak probe last year that sought the phone records of directors and journalists. The company's chairman, general counsel, and three other executives later resigned.

In seeking no-action relief, H-P argued that Rossi's proposal was excludable under SEC Rule 14a-8(i)(10) because the company already "substantially implemented" the proposal by adopting a pill policy in 2003. That policy "allows the submission of any poison pill to a stockholder vote," but it includes a "fiduciary out" provision that allows the board to act on its own, if directors conclude that such a vote "would not be in the best interests of shareholders under the circumstances."

The Palo Alto, California-based computer maker, which doesn't have a pill in place, also argued that the fiduciary out provision is required under Delaware law for directors to satisfy their fiduciary duties. H-P cited recent instances where the SEC staff granted no-action relief to Radio Shack, Tiffany, and Home Depot based on that argument.

H-P also sought to exclude Rossi's proposal by asserting that it contains irrelevant and materially false and misleading statements. The proposal calls for retaining a new outside attorney and raised the issue of proxy access. The staff of the Corporation Finance Division was not persuaded by H-P's arguments and issued a Dec. 21 letter denying the company's no-action request. (H-P also is seeking to exclude a proxy access proposal filed by four pension funds. For more on that proposal, see the lead story in this week's issue.)

Unlike poison pill proposals filed by investors last season, Rossi's proposal did not ask H-P to amend its charter or bylaws "if practicable." Last year, the SEC staff allowed Electronic Data Systems and other firms to exclude bylaw proposals that contained that phrase, as the SEC staff concluded such qualified proposals were not substantially different from the pill policies that those firms had in place.

Four other companies have filed no-action requests to exclude 2007 bylaw proposals that are similar to the resolution at H-P, but it was not known as of press time whether the SEC staff had ruled on those requests.

ISS is pleased to present the 2007 Proxy Season Watchlist, which offers the latest data on the number of key corporate governance shareholder proposals for the 2007 proxy season.

Watchlist highlights to-date include:

* There are 99 pending proposals on majority vote to elect directors versus 94 that came to a vote in 2006.
* There are 39 pending proposals on linking pay-to-performance versus 17 that came to a vote in 2006.
* There are 40 pending proposals to report on or disclose political contributions versus 28 that came to a vote in 2006.

The Watchlist will be updated twice monthly. We encourage you to visit this page often for all the latest shareholder proposal numbers.

A late December move by the Securities and Exchange Commission, altering the way in which U.S. companies must report the value of executive stock-option grants, is being criticized by investors and a key lawmaker as ill-conceived and poorly timed.

The move effectively allows companies to report a lower value for option awards by disclosing values as they vest, rather than upon award. The commission's original rules, approved in July, required companies to disclose option award values at the time of the grant, thus giving investors a better idea as to the overall value the board placed on the award, according to supporters of the original provision.

"We're disappointed and feel it's a step back from full transparency for investors," Amy Borrus, deputy director at the Council of Institutional Investors, told Governance Weekly. "Investors will need to do more work to determine" the full worth of pay packages.

Commission officials argue the change will give investors a more accurate picture of executive pay packages because it will prevent the reporting of compensation that might not be realized. "The object is to report accurate numbers...reporting "phantom" pay that will never be received, is just as misleading as routinely under reporting it," SEC Chairman Christopher Cox said in a statement.

Cox also noted that the new rules will require reporting of option awards in a manner consistent with that mandated by the Financial Accounting Standards Board for corporate financial statements, thus providing "maximum clarity and consistency for investors."

The interim final rule was not subject to comment before its release and will apply to all companies filing proxy statements on or after Dec. 15, 2006, which was the same effective date for the other new disclosure rules. The SEC said it would accept public comments on the rule change for 30 days after the rule is published in the Federal Register and will make changes in February, if necessary.

Industry groups, including some like the Business Roundtable that supported the original rule, are welcoming the change, calling it a "more fair and balanced" way to report stock options, which will allow shareholders to determine what executives will receive, rather than what they may obtain.

Timing Questioned
Some investors have questioned the commission's decision to publicly announce the switch on the last business day before the Christmas holiday.

"They did it at the worst possible time, during the holiday season, with no chance for investors to respond, and they made it as a final rule," said Richard Ferlauto, director of pension and benefit policy at the American Federation of State, County, and Municipal Employees (AFSCME). "They should not be surprised to see this outrage."

SEC officials are rejecting the suggestion that the announcement was timed to avoid public scrutiny, saying the information was posted publicly as soon as it was approved by the federal agency overseeing regulatory policies. "Commissioners approved the amendment on Dec. 15, and we posted it as soon as it was cleared by the Office of Management and Budget, which just happened to be late in the day on Friday," SEC spokesman John Heine told Governance Weekly.

Ferlauto predicts the last-minute reversal and resulting outcry will translate into higher support for shareholder resolutions seeking to tie pay to performance and to give investors a greater say on pay packages. Ferlauto also said he expects these concerns will resonate on Capitol Hill, where leadership of committees now rests with Democratic lawmakers who traditionally have been more responsive to criticism from labor and other groups of "excessive" executive pay.

"[T]his slippage is regrettable both substantively and for not having been open to more public discussion," Rep. Barney Frank, the incoming House Financial Services Committee chairman, said in a statement. "Backtracking by the SEC on this important matter of stock options reinforces my determination that Congress must act to deal with the problem of executive compensation."

Frank, a Massachusetts Democrat, will hold hearings to address the growing "inequality gap" evidenced by today's executive compensation packages, committee spokesman Steven Adamske told Governance Weekly, though no schedule has been set.

Focus Remains on Options, 'Say on Pay'
The SEC's rule reversal is not the only issue serving to ensure investors remain focused on executive pay in 2007. In recent months, options backdating has generated controversy as more than a hundred companies face regulatory or internal probes over allegations that executives received awards timed to coincide with share price lows.

Most recently, the board of Apple Computer has been criticized over option awards for CEO Steve Jobs. A special committee of the board said Dec. 29 that Jobs was "aware of or recommended the selection of some favorable grant dates," but did not benefit financially, The Wall Street Journal reported.

Board members, including former U.S. Vice President Al Gore, said the committee defended Jobs and gave no indication the company would hold him accountable for grants that the Cupertino, Calif.-based firm has acknowledged were backdated.

Backdating also will remain a focus in light of proposals filed by some activist investors including the Amalgamated Bank's LongView fund, which is asking companies to permanently fix grant dates or set dates for making option awards that will be announced before a fiscal year begins. (An exception would be made for awards to executives recruited from the outside, according to the proposal text, provided that the strike price is not linked to the release of material, non-public information that could affect the stock price.)

The LongView fund, with the Connecticut Retirement Plans and Trust Funds, has filed the proposal at Apple Computer, among other firms.

Labor funds, public pension funds, and individual activists have so far filed more than 30 "say on pay" proposals that seek an advisory shareholder vote on compensation. That proposal, which was introduced by AFSCME last year, averaged roughly 41 percent support at seven companies in 2006. This week, the New York City Employees' Retirement System announced it would target Par Pharmaceutical, Blockbuster, and Home Depot with the resolution.

Home Depot, a principal target last year for investors frustrated over failures to tie pay to performance, this week announced the resignation of CEO Robert Nardelli, who leaves with a $210 million separation package that includes $20 million in cash severance.

Nardelli received roughly $225 million during his six-year tenure as the company's stock price fell and the home improvement giant lost market share to rival Lowe's, Bloomberg News reported.

Frank denounced Nardelli's severance package as a "consolation prize for bad performance,'" and said the company's example illustrates why shareholders need more power to influence corporate pay decisions, according to Bloomberg News. Frank said he would sponsor legislation to allow shareholders to vote on executive compensation packages. A similar measure proposed by Frank stalled last year when Republicans controlled Congress.

Nardelli's exit follows other high-profile CEO departures including that of Henry "Hank" McKinnell at Pfizer, and Bill Ford Jr. at Ford Motor, that, analysts say, are a growing sign that boards are heeding investor demands over performance and executive compensation.

"Boards are sensitive to these issues and are responding to shareholder concerns," said Thomas Lehner, the Business Roundtable's director of public policy.

On Dec. 5, a U.S. appeals court ruled that a judge improperly granted class-action status to investors' claims against Wall Street banks over their underwriting of initial public offerings by technology firms in the late 1990s.

The investors, who previously reached a tentative $1 billion settlement with 310 Internet companies, contend that the banks manipulated IPOs to maximize their fees. The shareholders alleged that the banks created an artificial demand for the shares of these technology firms by requiring IPO clients to buy more stock later at higher prices.

A three-judge panel of the U.S. Court of Appeals for the Second Circuit ruled that the investors' claims weren't similar enough to be tried together in the same class. A federal judge certified the class based on six "focus cases."

The ruling is a significant victory for Morgan Stanley, Credit Suisse Group, and 10 other Wall Street firms, because many of the individual investors in the rejected class won't bother to pursue their claims separately or have the leverage to force the banks to agree to a generous settlement.

"Someone with a loss of $5 per share on a couple of hundred shares isn't going to waste the time and effort it takes to sue all these folks," Lawrence Hamermesh, a law professor at Widener University, told Bloomberg News. "When you combine all those losses together into $10 billion, then people have enough of a stake to keep going."

Melvyn I. Weiss, the lead lawyer for investors, said he would appeal the ruling. "It's not over," Weiss said, adding that the ruling applies only to the six focus cases and that other cases could meet the standards for class certification, The New York Times reported.

"The judges really are leaving some people who have been injured without any remedy," Weiss told Bloomberg News.

According to The New York Times and The Wall Street Journal, the appellate ruling may also jeopardize the $1 billion settlement with the IPO issuers and a separate $425 million tentative accord that investors reached with JP Morgan Chase in April. Neither settlement has received final court approval.

What did you know? When did you know it? These are the key questions in most investigations of possible corporate improprieties.

In the case of grant timing at Apple Computer, the answers to these questions are not in dispute. Apple's painstakingly thorough post-mortem of the calendar-shredding stock option grant practices indicates that CEO Steve Jobs knew about, and on occasion even suggested, use of "favorable" dates.

At some firms caught up in the grant-timing morass, the disclosure of similar conclusions from an investigation has been followed by the placement of a cardboard box full of the CEO's stuff out on the curb in front of corporate headquarters. The Apple board slid Jobs a break, however, based upon its conclusion that he didn't "financially benefit from" the grants or "appreciate the accounting implications" of Apple's use of a stock option time machine. While the directors (fronted by former Vice President Al Gore who may appreciate the fine legal distinctions thanks to his front row seat at the White House during Monica-gate) reached these conclusions, it's possible that the SEC or another body will not. As such, Apple will remain under a dark cloud for the foreseeable future.

Left unanswered, of course, is the more obvious question: Did Jobs appreciate the ethical implications of his actions? If the Apple board or Jobs needs a character reference, it should take former Sun Microsystems CEO Scott McNealy off its list. A New Year's Day story in the San Jose Mercury News provided McNealy's recent take on the backdating controversy at a Stanford University Faculty Club dining room event. "They never taught me in school that you are supposed to put the date that you signed it,'" McNealy said. "It was kind of intuitively obvious to me that you didn't backdate." Sun hasn't been caught with a backdating problem.

What are your thoughts on the current options saga at Apple? Please let us know.