BlackBerry maker Research In Motion is taking a hit of $250 million US to cover stock options issued — often to senior officers — at prices not previously reflected in the company's books.

"I'm not making any excuses. It's on my watch. I'm responsible," co-CEO Jim Balsillie told the Canadian Press. "We're going to do everything in our power to do the right thing and make sure everything is as it should be."

Research in Motion co-CEO Jim Balsillie, pictured at a Toronto Board of Trade dinner on Jan. 29 in Toronto, is stepping down as chairman.
(Nathan Denette/Canadian Press)

The non-cash charge, covering fiscal 2004, 2005 and 2006 and the first quarter of fiscal 2007, was revealed Monday after a special committee of two directors delivered a scathing preliminary assessment of the company's accounting for options. RIM's fiscal year falls at the end of February or beginning of March.

The company said it doesn't expect big changes to current or future financial years' results because it has changed its accounting system.

Balsillie is resigning as chairman, in line with the best practices in corporate governance now, which separate the jobs of chair and CEO. He is still co-CEO, and a director.

The company said the exercise price of millions of options "was less than the fair market value" when the paperwork was done. "In many instances" — including grants to Balsillie and co-CEO Mike Lazaridis, chief operating officers and chief financial officers — "hindsight was used to select grant dates with favourable pricing" so the executives got a benefit that was not recorded in the financial statements.

All RIM's directors and all C-level (chief executive, chief financial or chief operating) officers have agreed to repay in cash any extra money they got from improperly priced options they exercised.

Precise details as to whom and how much are not known yet, the company said. Details will be disclosed later. 

Balsillie and Lazaridis have offered to give the company up to $5 million (Cdn) each toward the costs of the review.  

No intentional misconduct

In some cases where options were dated using favourable historical pricing, the date selected preceded a run-up in RIM's share price. This may have left the impression that grants were "spring-loaded" (made before the release of facts likely to boost the stock price), but there's no evidence of that, the review found.

No intentional misconduct was discovered, although the company said the process of granting options "was characterized by informality and a lack of definitive documentation, and lacked safeguards to ensure compliance with applicable accounting, regulatory and disclosure rules."

Balsillie and CFO Dennis Kavelman, who is moving from that job to become chief operating officer, administration and operations, were both involved at different times in granting options. They said at the time they had a general understanding that options could be granted at a chosen date within a range. "Their understanding was incorrect," the company said.

New employees and top executives both got mis-dated options, but most of the new 1,500 hire grants were OK, while a "majority" of 1,700 "periodic grants" — made to employees on promotion — had wrong dates. More than  2,030 employees and directors got options.

The company's audit committee began a review of options grants in August 2006, and on Sept. 28 announced a preliminary finding that errors made would cost up to $45 million US.

Two weeks later, it said "an additional error" would raise the amount.

By late October, the U.S. Securities and Exchange Commission was looking at the options grants, and in early November, the Ontario Securities Commission confirmed it was looking into the situation.

The company said it is reorganizing its board of directors, increasing the number to nine from seven by adding Barbara Stymiest, chief operating officer of Royal Bank of Canada and John Wetmore, a director of the University of Waterloo and Loblaw Cos. 

With files from the Canadian Press