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RIM stock-option review: $250M in adjustments

Research in Motion Ltd. has announced that it will adjust its earnings by $250 million due to the results of an internal review of its stock-option grants, and that several corporate officers will change positions as a result of the review.
In September, RIM announced it expected a charge of within the range of $25 million to $45 million because of accounting errors made in connection with stock options granted since the company’s initial public offering in 1997. The company then reported in October that further adjustment would be needed, since another error in applying U.S. generally accepted accounting principles was discovered during the review.
A RIM committee reviewed the circumstances surrounding more than 3,200 stock-option grants from December 1996 to August 2006 and more than 700,000 electronic and paper documents. The company said it concluded that “incorrect measurement dates for accounting purposes have been identified for approximately 321 grants in respect of options to acquire 4,581,000 common shares” between February 2002 to August 2006; or about 63 percent of the grants made by the company after Feb. 2002.
“The practices identified . benefited employees across all levels at RIM,” the company said in a statement. “However, by virtue of options granted over a larger number of common shares to more senior employees, such employees received a greater individual benefit from the company’s options-granting practices.”
The company halted such trades in November.
Aside from the earnings adjustment, RIM also promised changes including a new oversight committee of the board of directors, separating the duties of chairman and CEO, and increasing the size of its board from seven to nine members.
Although the board decided that no one should be asked to leave the company as a result of the review, several executives are shuffling their duties. RIM’s Jim Balsillie voluntarily stepped down as chairman, although he will continue leading the company as a co-CEO and director. The company’s CFO, Dennis Kavelman, will become RIM’s COO of administration and operations. Brian Bidulka, currently RIM’s corporate controller, will take over as chief accounting officer and take responsibility for the company’s stock-option program.
RIM’s stock remained relatively unchanged after the news, trading at around $135 per share.
RIM is one of a number of companies dealing with the financial impacts of improper stock-options grants.


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