The use of equity-based remuneration, particularly options, gave management a huge incentive to concentrate on short-term increases in share prices, particularly as they knew that the investment community demanded it. ·  Second, there were many means available to make profits look larger than they really were.
The non-expensing of options being the most obvious, but others would include the use of special purpose vehicles and other off-balance sheet entities, the non-recognition of deficiencies in company-sponsored defined-benefit pension funds and the bringing forward of revenue recognition. In this country, we saw some very creative things being done with financial re-insurance, which basically had the aim of inflating recorded profits.