Blackberry 2007 Annual Report Download - page 57

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accounting treatment, (2) the misapplication of U.S. GAAP
in the accounting for certain share awards granted prior to
the adoption of the Stock Option Plan, which also resulted
in variable accounting treatment and (3) the misapplication
of U.S. GAAP in the determination of an accounting
measurement date for options granted after February 27,
2002. The Special Committee determined that the Company
failed to maintain adequate internal and accounting controls
with respect to the issuance of options in compliance with
the Stock Option Plan, both in terms of how options were
granted and documented, and the measurement date used
to account for certain option grants. The grant process
was characterized by informality and a lack of definitive
documentation as to when the accounting measurement
date for a stock option occurred, and lacked safeguards to
ensure compliance with applicable accounting, regulatory
and disclosure rules. The Special Committee did not find
intentional misconduct on the part of any director, officer
or employee responsible for the administration of the
Company’s stock option grant program.
The Board of Directors, based on the recommendations
of the Special Committee, has implemented a number
of measures in response to the findings of the Special
Committee, including measures that are designed to enhance
the oversight and corporate governance of the Company and
to strengthen the Company’s control over its stock option
granting process in particular. These measures include:
• Changes to the Company’s Stock Option Granting
Practices – Following the commencement of the review
on August 8, 2006 and until the adoption by the Board
of Directors of the interim option granting process
described below, grants of stock options by the Company
were effectively suspended with the exception of certain
limited grants to new employees that were reviewed by
the Company’s internal counsel as well as its outside
counsel and outside accounting consultants, and which
were approved by the Compensation Committee and
the Special Committee. In December 2006, the Board of
Directors adopted an interim option granting process,
whereby all stock options (including stock options
for new hires during a fiscal quarter) would be issued
and priced quarterly and approved in advance by the
Compensation Committee or the Board of Directors.
The Compensation Committee and the newly formed
Oversight Committee of the Board are reviewing the
interim option granting process in light of evolving best
practices and will recommend to the Board any changes
required as a result of this review. In addition, as noted
above, following the commencement of the Review,
each grant of stock options has been reviewed by the
Company’s internal counsel as well as its outside counsel
and outside accounting consultants, a process that will
continue until the completion of the review of the interim
option granting process by the Compensation Committee
and the Oversight Committee, and the engagement by
the Company of a new employee that will be responsible
for administering the stock option granting program, as
described below.
• Changes to the Company’s Board of Directors, Board
Committees and Organizational Structure – In accordance
with the Special Committee’s recommendations and other
considerations, the Board of Directors has established
a new Oversight Committee, separated the roles of
Chairman and CEO, implemented other changes to the
Company’s Board, Audit Committee, Compensation
Committee, and Nominating Committee, and has changed
various management roles.
• Other Changes – The Company is in the process of
establishing an internal audit department, the head
of which will report directly to the Audit Committee.
Additionally, the Company is enhancing its capabilities
in U.S. GAAP and in securities disclosure and compliance
matters issues by establishing two new permanent full-
time positions to be filled, respectively, by an employee
with expertise in U.S. GAAP and an employee with
expertise in securities disclosure and compliance. The
latter employee will be responsible for administering RIM’s
stock option granting program.
Management’s Consideration of the Restatement
In assessing whether the Company’s disclosure controls and
procedures and its internal control over financial reporting
were effective as of March 3, 2007, management considered,
among other things:
• the nature and impact of the Restatement as disclosed
in Note 4 of the notes to the Fiscal 2007 Financial
Statements;