The largest accounting scandal in the world may not be Enron, WorldCom, Tyco, or Conseco. For now, Parmalat Finanziaria SpA of Italy is in the running for that record. Parmalat's founding family, the Tanzi family, may very well end up being the single largest recipient of money from a bankrupt firm. A major issue surrounding the accounting scandals is the level of compensation former executives received from their firms. In some cases employees and shareholders ended up with nothing. The details of the Parmalat accounting scandal can be found at www2.accountancyage.com/specials/1136019.

1. Using the Web links provided in the chapter opener, find the amount of the compensation (include any money supposedly stolen from the firm or personal expenses paid for by the firm) for the top executives in each of the following companies.
   1. Conseco
   2. Enron
   3. Parmalat
   4. Tyco
   5. WorldCom
2. Estimate the amount of money lost by the firm's shareholders as a result of the bankruptcy. This can be measured in terms of decrease in share price from peak to today.
3. Calculate the ratio of executive compensation per total shareholder loss in value.
4. Rank order the executives, from highest ratio to lowest ratio, and provide an analysis of the results.

The idea of using stock options to align managers' and investors' interests has been readily accepted for years by the finance community. Issues surrounding the interpretation of reported earnings have led many to question the level to which stock options are being used to compensate firm managers. A BusinessWeek article entitled "Too Much of a Good Incentive?" discusses issues related to options used for compensation. The article can be found at www.businessweek.com/magazine/content/02_09/b3772049.htm.

After reading this article, discuss the following questions.

1. What problems seemed to result from option grants in the late 1990s?
2. What issues surround the expensing of option grants at the time of issue?
3. What does the author suggest is the real cost associated with options that is not recognized when the options are granted?