A new study by Harvard Law School's Program on Corporate Governance released this week suggests that options grants to outside directors "have been favorably timed to an extent that cannot be explained by mere luck."
The study, entitled Lucky Directors, was written by Prof. Lucian Bebchuk (Harvard Law School), Prof. Yaniv Grinsten (Cornell University - Samuel Curtis Johnson Graduate School of Management) and Prof. Urs Peyer (INSEAD).
The authors found that, out of all director options grant events during 1996-2005, 9% were so called "lucky grant events" - falling on days with a stock price equal to a monthly low.
The study estimates that about 800 "lucky grant events" were timed opportunistically, and that approximately 460 different companies and more than 1400 outside directors were associated with grant events involving such timing.
Additionally, the study found that 3.8% of all options grant events were "super-lucky," defined as taking place at the lowest price of a calendar quarter.
Daily Trivia: Harvard's Program on Corporate Governance is part of the John M. Olin Center for Law, Economics, and Business. The Center was founded in 1985, but in 2003 received a $10 million grant from the John M. Olin Foundation. The gift was the largest foundation grant in the history of Harvard's Law School. The foundation was started by John Merrill Olin, the late founder of Olin Corporation (NYSE: OLN), a major manufacturer of copper alloys, ammunition, and chlorine and sodium hydroxide.