Mercury Interactive has been one of the darlings of the software industry for the past five years. Their darling status collapsed last year when the Company announced the forced resignation of its founder and CEO, Amnon Landon, its CFO Douglas Smith and General Council Susan Skaer.
This week, Mercury Interactive filed its long delayed 2004 10K which describes what turned out to be 54 instances of stock option grant backdating. Mercury certainly isn't the only company who engaged in this ethically unacceptable and perhaps illegal activity, but they are certainly the software industry poster child.
We've personally worked with companies where, in retrospect, it was discovered that certain executives conducted themselves unethically and in some cases illegally. These have been disappointing and disheartening experiences as we were lied to and deceived directly. It's incredible discouraging to have the covenant of trust broken by someone whom you respect. The only consolidation we've found is to try to learn lessons from the experience.
Mercury Interactive has many lessons to teach on how greed and hubris can break people and even fundamentally change a companies course. Enron may be the most striking example but there are many other examples to learn from. Jack Ciesielsky posted an excellent analysis on Mercury Interactive today at SeekingAlpha. We encourage all to read carefully.
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