By Tom Bradley

“The conduct at issue relates to stock options granting practices at RIM which, over a ten year period from December 1996 to July 2006 were inconsistent with the terms of RIM’s stock option plan and with RIM’s public disclosure.”

- An excerpt from the settlement agreement between the Ontario Securities Commission (OSC) and senior executives of Research in Motion (RIM) dated January 27th, 2009.

I love my Blackberry.

I think Research in Motion is a terrific company.  I’m especially proud that it is Canadian and has not sold out to the foreign competition.

“Options were to be granted at an exercise price of not less than the closing price of RIM's common shares on the TSX on the last trading day preceding the date on which the grant of Options was approved.”

I like the fact that the founders are reinvesting their wealth and energy in making Canada a better and more competitive country.

I own a good chunk of RIM stock through my holding in the Steadyhand Equity Fund.

“Balsillie, Lazaridis, Kavelman and Loberto engaged in the grant of Options, in which Option Backdating or Option Repricing occurred. The grant dates selected resulted in more favourable pricing for the Options or ‘in the money’ grants as described above. In many instances, the lowest share price in a period was chosen using hindsight in order to set the grant date and, therefore, the exercise price.”

I am also highly conflicted when I read that these executives have settled with the Ontario Securities Commission on the charge of adjusting the price on options to their advantage.

I know they weren’t the only ones doing it.  There were others including some high profile players like Apple.  There is always pressure to attract and keep top talent.

“Approximately 1,400 of 3,200 Option grants made by RIM during the Material
Time were made using Incorrect Dating Practices, many of which gave the recipient an undisclosed benefit that was not authorized or permitted by the Plan or the TSX Rules.”

And I know that these guys are some of the best that Canada has to offer.  We need and want them to lead us to a higher place on the global business stage.

But...

Their actions displayed a total disregard for the public shareholders of RIM - shareholders that paid real money (they were not granted free options) and took all the risk that goes with owning shares in a technology company.  The executives and board betrayed their trust.

All of which leads me to conclude that they got off easy.  It has been pointed out to me that no crime was committed here, the allegations against the RIM team were in the nature of 'regulatory offences' only, and the settlement based on admissions of negligence. But I wonder whether the existing regime and penalties are sufficient to deter these kinds of situations. In this case, and presumably others like it, all the parties have to do is make up for the damage they caused and pay some legal bills. None of them will feel the penalties in the least.  In no meaningful way will they be restricted from carrying on business.   

Should we be thinking more seriously about where and how we draw the line between regulatory and criminal offences and the penalties that flow from that distinction? I think we are too soft on 'white collar crime'.