Clarification: After further review of the company?s internal audit results, the company?s board of directors concluded that Hirst had no involvement in the backdating of stock options.
–BB Staff, March 2008
KB Home CEO Bruce Karatz vacates his executive seat amid a storm of controversy related to the backdating of option grants. An internal investigation found that Karatz, retroactively selected option grant dates between 1998 and 2005 to coincide with low share prices, chunking up Karatz's already beefy compensation. Moreover, Richard B. Hirst, the company?s executive vice president, resigned while the company terminated Gary A. Ray, head of human resources, in the wake of the investigation.
Karatz will have to refund excess profit stemming from the backdating. Already he has agreed to forfeit roughly $13 million in gains. His remaining outstanding options will be repriced. To adjust for the backdating, KB expects charges to the balance sheet to cap at $50 million.
The board of directors elected COO Jeffrey T. Mezger to succeed Karatz as CEO and president.