Quick Take: Costco's CEO Makes Things Right

Motley Fool Stock Advisor selection Costco (Nasdaq: COST  ) and its management team have once again proven the company takes its duty to shareholders seriously.

Yesterday, in an 8-K filing with the SEC, the company disclosed that CEO Jim Sinegal had written the company a check for $200,000 to return any illegitimate gains he may have reaped from exercising an improperly dated stock-option award earlier in the week.

In Costco's original investigation into its option grants, the company couldn't find any conclusive evidence of options being backdated. The company did, however, find a few cases where employees received options and the company couldn't determine if the grants were priced when awarded (the two should match). In one of these cases, at least one executive may have benefited from a mismatch. Costco doesn't specifically say when the grant Sinegal exercised last week was made, but it's safe to assume it is from one of these grants.

I could spend a lot of time hypothesizing about what might have happened and when, but I don't think it's worth the effort. If the grant was incorrectly dated and priced, Sinegal has tried to do the right thing by returning the money he might not deserve. Given that Sinegal is reasonably paid otherwise, I'm perfectly happy to move on.

UnitedHealth Group (NYSE: UNH  ) , which was one of the first companies fingered for options backdating, followed a similar path when executives had all their option grant prices reset to the highest price for the year each grant was made. It will be interesting to see if things unfold the same way at Apple (Nasdaq: AAPL  ) and other companies wrestling with option backdating problems.

UnitedHealth Group is both a Stock Advisor and an Inside Value selection. Both market-beating newsletters are available for a free 30-day trial.

Comments? Bring them here.

At the time of publication, Nathan Parmelee had no financial interest in any of the companies mentioned. He was ranked 58th out of 25,196 CAPS investors. The Motley Fool has an ironclad disclosure policy.


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