Options backdating which companies are at risk dating men that talk future
The Bottom Line Although more culprits in the options backdating scandal are likely to emerge, because standards such as Sarbanes-Oxley have been instituted, the assumption is that it will be more difficult for public companies and/or their executives to hide the details of equity compensation plans in the future.ran this article questioning executives’ personal use of corporate aircraft.
In order to lock in a profit on day one of an options grant, some executives simply backdate (set the date to an earlier time than the actual grant date) the exercise price of the options to a date when the stock was trading at a lower level. In this article, we'll explore what options backdating is and what it means for companies and their investors. Most businesses or executives avoid options backdating; executives who receive stock options as part of their compensation, are given an exercise price that is equivalent to the closing stock price on the date the options grant is issued.
The first article (via wsj.com, subscription required) in the series, entitled "The Perfect Payday," appeared on March 18, 2006.
The article reported an apparent (but statistically unlikely) pattern at several companies of options grants to senior executives dated just before a sharp rise in the share price, and at or near the bottom of a steep dip.
They also fully disclose this compensation to investors, and deduct the cost of issuing the options from their earnings as they are required to do under the Sarbanes-Oxley Act of 2002.
But, there are also some companies out there that have bent the rules by both hiding the backdating from investors, and also failing to book the grant(s) as an expense against earnings.As a result, the company has been forced to recognize a stock-based expense increase of 3 million between 19. It has also been the subject of a civil and a criminal complaint. According to a 2005 study by Erik Lie at the University of Iowa, more than 2,000 companies used options backdating in some form to reward their senior executives between 19.