SAN FRANCISCO – McAfee Inc. (MFE) on Tuesday said it fired its general counsel for improper conduct involving the software maker's stock options, raising more intrigue over an inquiry into how the company priced some of the incentives awarded to its top executives.
The Santa Clara, Calif.-based maker of antivirus software linked Kent Roberts' ouster to a stock option incident that occurred six years ago. McAfee described the episode as improper without providing specifics.
A McAfee spokeswoman did not return a message seeking comment late Tuesday. Efforts to locate Roberts for comment were unsuccessful.
McAfee is among a widening group of publicly held companies examining whether insiders manipulated the timing of stock option grants to increase the likelihood that management would reap huge windfalls. On Tuesday, Rambus Inc. (RMBS), a developer of high-speed computer chip interfaces, joined that group of companies, launching an internal investigation into how officials doled out stock options in 2003 and before.
Under the practice, the options are backdated to an ebb in a company's stock price instead of pegging the exercise price to the prevailing market value at the time of the award.
Stock options become more valuable as the market price rises above the exercise price, so backdating fattens the spread.
McAfee disclosed its inquiry into the timing of past stock options earlier this month.
In announcing Roberts' firing, McAfee said its board's audit committee is continuing the stock option review with the help of independent counsel. The company also acknowledged discussing its past option grants with the staffs of the Securities and Exchange Commission and the U.S. Justice Department.
McAfee's shares fell 51 cents, or 2.1 percent, to close Tuesday at $23.44 on the New York Stock Exchange.
Roberts, 49, had worked for McAfee for the past eight years, including the past five as the company's general counsel. He realized a $3 million gain last year by exercising 183,293 options and received a grant of 55,000 additional options at an exercise price of $21.61, the trading price of McAfee's stock at the time of the award, according to SEC documents.
McAfee paid Roberts a salary and bonus of $563,890 last year. His contract calls for a severance package including a full year of pay unless he is fired "for cause."
Firings of top executives represents the biggest risk faced by companies as the delve into the possible backdating of stock options, said Deutsche Bank Securities analyst Todd Raker.
McAfee's management team is "relatively well sheltered" from the issues, however, with its chief executive having joined in early 2001 and its finance chief having come on board in late 2004, Raker said.