Forrester: we backdated stock options

Forrester Research Inc. said today that it determined it granted stock options with the wrong strike prices.

The market researcher said it may have to delay its annual report to the Securities and Exchange Commission.

Shares of Forrester fell $1.06, or 3.9 percent, to $26.20 in midday trading on the Nasdaq Stock Market.

Forrester said an internal committee, assisted by two law firms, concluded that there was a lack of effective controls and documentation in the company's stock-option granting practices, especially from 1997 to 2003.

The company said it awarded options with exercise prices that were lower than the market value of the stock on the date the grants were finalized, and as a result may have not recorded enough charges for the options.

It's not illegal to "backdate" an option to a lower exercise price, but it must be disclosed to shareholders. Also, the company's financial statements must properly reflect the value of the options awarded.

Forrester said responsibility for the mistakes is shared between the finance and human resources organizations. The people in charge of those organizations at the time are no longer at the company, Forrester said.

Forrester Chief Executive George F. Colony and two current directors "participated in some measure" in approving the grants, but the company said there's no evidence they were aware of improper practices.

Forrester said it is unable to determine if it will have to materially restate previous financial statements or if its final results for 2006 will differ from the preliminary results issued Wednesday. Its annual report is due on March 16.

At least 200 companies are either investigating their stock options grant practices or subject to government scrutiny for possibly backdating stock option grants. (AP)