What are backdating scandals Chatrandom cifler
Though the SEC rules require accelerated disclosure of options grants and there is appreciation for the problem, more changes might be needed to curb abuses.
In testimony last fall, SEC Chairman Cox blamed the options backdating on a tax law from 1993.
Stock options frequently tie into executives’ compensation.
Typically, execs get the option to purchase a certain amount of stock at a set price.
The lower this “strike price” is, the less the executive pays for the stock.
When these options then “vest” after a period of time, the executive can sell them at the new share price.
The investigations have resulted in fines and penalties, but have we dealt with the fundamental questions of governance and accountability?
When the matter makes court, Apple’s former general counsel pays .2 million to settle charges that she backdated stock options for Jobs, herself and others — and created fake paperwork to hide this fact.
Today’s “Today in Apple history” is significant, though, because it was one of the big scandals that rocked Apple during its big climb back to the top in the mid-2000s.
Since the advent of stock option backdating, corporate policies have moved first toward a posture of encouraging backdating as a standard business practice, but then toward a posture of avoidance as public scandals emerged and investigations into fraudulent or dishonest business practices increased despite a commonly held belief that backdating was an acceptable and legal practice.
When company executives discovered that they had the ability to backdate stock option grants, thus making them both tax deductible and “in the money” on the date of actual issuance, the common practice of stock option backdating for financial gain began on a widespread level.
That can mean a nice bonus if the company increased in value.
, which broke the backdating story, Jobs’ award of 7.5 million shares got approved at Apple’s August 29, 2001, board meeting. However, Jobs continued to argue over the point at which the options would vest.