But Karatz resigned in November 2006 after an internal investigation found he had backdated his own stock option grants to boost his compensation. Karatz’s story  is one of the six case studies on the AFL-CIO’s 2007 Executive PayWatch website, which was released last week. Some 257 companies have announced internal reviews, Securities and Exchange Commission (SEC) reviews or Justice Department subpoenas related to stock option grants. This year, the PayWatch website features CEOs who backdated stock options to take what they want from their companies and their shareholders with impunity.
 
The internal investigation into the backdating of stock options at KB Home blamed Karatz and Gary A. Ray, the head of human resources, for altering the dates of grants between 1998 and 2005.  The company also is under criminal investigation by federal prosecutors, in addition to a formal SEC investigation.
 
KB Home has frozen Karatz’s severance pay—estimated at as much as $175 million—until an agreement is reached regarding how much he actually will receive. However, because Karatz’s exit package is part of a legally binding employment agreement, it might be difficult for the company to defend its position if it decided not to pay Karatz.
 
As a result of the stock option backdating scandal, KB Home seems to have taken some positive steps in corporate governance, such as adopting a new policy requiring all stock option grants and their terms to be approved by the board compensation committee and not granting any stock options to any executives in 2006.
 
But it still signed new CEO Jeffrey Mezger to an employment agreement that would give him a potentially sizable golden parachute . For more information about the Executive PayWatch site, click here.
 
To bring CEO pay under control, the AFL-CIO is supporting legislation and new SEC rules that would give shareholders more say over pay. Take action and tell your representative to co-sponsor H.R. 1257, the Shareholder Vote on Executive Compensation Act, which would require public companies to submit executive pay plans to a nonbinding shareholder vote, giving shareholders a “say on pay.”

And send a message to the SEC commissioners to let them know that you support giving shareholders the power to nominate directors and require companies to include these nominees on their proxy ballots.