Investigations shine light on procedures.

As the ongoing probes into possible stock option backdating intensify, companies are scrambling to understand whether or not they could be under the gun--and those that are have been quick to hire outsiders to help them get a handle on potential damage.

Roman Darmer, an attorney with Howrey LLC in Irvine, Calif., has been involved with a number of option backdating investigations, including one at McAfee, the antivirus software firm. At press time, that probe had already claimed the chief counsel and the president, both of whom were fired, and the CEO, who announced his retirement. (It's worth noting that the company's CFO and chief operating officer, Eric Brown, was being talked about as taking on a larger strategic role as a result of the shakeup.)

While he declined to talk specifically about that investigation, in which a special committee of the McAfee board hired his firm to look into the problem, Darmer says there has been a high concentration of such problems in young, particularly tech-oriented companies in places like Silicon Valley. "You're not seeing these problems in mature, highly regulated industries" where options are set once a year, and perhaps given only to the five top executives, he says. "A huge number of companies won't have problems."

Darmer notes that a host of documents needs to be examined, both paper and electronic: board minutes, agreements, personnel records, stock plan administration records. There are delegation of authority issues, as well, but "there really is no template. It's really fact- and company-specific. Stock administration may be under HR [human resources] or in finance; everyone has different procedures." He adds, however, that "we're seeing similar themes, and the types of things that are being reviewed."

More recently, he notes, the trend in stock option recordkeeping and documentation has been toward electronic records, including emails.

Richard Cellini, a vice president with Integrity Interactive, a Waltham, Mass.-based firm providing Web-based training on compliance and ethics issues, says that while the backdating mess has put an intense focus on boards and compensation committees, it goes beyond them. "Almost nothing happens without staff in large corporations," he says. "Underlings can get caught up in some of these situations."

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Ethics training "distributes awareness," Cellini adds. "You should be able to raise the issue directly with someone who is asking you to do something suspect." Topping that list, he says, would be orders to backdate or shred a document, though he acknowledges that those may be legitimate requests.

Cellini, who has himself been general counsel at two companies, says the fact that some general counsels have been fired or forced to resign in the wake of the backdating scandals signifies that "they were not playing by the rules." The general counsel is "a mine canary--he or she should resign rather than do something unethical," he adds. "There are worse things for a general counsel than to leave a company--like being disbarred."

More problems are expected to surface. Published reports say that more than 150 companies are under investigation, and two professors, Randall A. Heron and Erik Lie, at the Universities of Indiana and Iowa, respectively, estimated in a recent paper than 18.9 percent of unscheduled, at-the-money option grants to top executives were backdated or otherwise manipulated in the years 1996-2005.