The options backdating

30 Jun

A paper (click for PDF) that Lie and Randall Heron, an associate professor at Indiana University's business school, published on July 14 estimates that 18.9 percent of unscheduled grants to top executives from 1996 through 2005 were backdated or manipulated.The pair estimates that 29.2 percent of firms manipulated grants to top executives at some point between 19.Also, some companies have independently confirmed that they've been contacted by federal investigators.Those include Altera, Applied Micro Circuits, Asyst Technologies, CNET Networks (publisher of CNET News.com), Equinix, Foundry Networks, Intuit, Marvell Technology Group, RSA Security and Veri Sign.Of course, honest CEOs would help too.) Q: What lawsuits have been filed by investors over stock option backdating?Apple faces a number of suits filed on behalf of shareholders and pension plans in federal and state courts in California.(The options would be worthless if the stock fell to, say, .) Think of options as coupons you can sell.If you have a coupon to buy a Ferrari for 0,000, and the market price of the car is 0,000, your coupon is worth ,000.

the options backdating-19

Federal officials on July 21 in San Francisco to announce civil and criminal charges relating to allegations of stock option backdating by former top executives of the networking-gear manufacturer.

Then, after the announcement boosts the share price to , each option would be worth . "Then you have both insider trading and you have an accounting issue," Ryan said.

"An old-fashioned cooking-the-books fraud." Q: Would fixing executives' grant date to, say, July 1 every year fix things? tax code limits companies' ability to deduct pay for certain executives if the amount exceeds

Federal officials on July 21 in San Francisco to announce civil and criminal charges relating to allegations of stock option backdating by former top executives of the networking-gear manufacturer.

Then, after the announcement boosts the share price to $25, each option would be worth $5. "Then you have both insider trading and you have an accounting issue," Ryan said.

"An old-fashioned cooking-the-books fraud." Q: Would fixing executives' grant date to, say, July 1 every year fix things? tax code limits companies' ability to deduct pay for certain executives if the amount exceeds $1 million a year.

Any of those three categories could yield civil (and perhaps criminal) legal action. Second, do the backdated options constitute "nonqualified deferred compensation," in which case the companies may be liable for excise taxes? If they had stock options that were backdated and not disclosed, that essentially provides executives (or other employees, but typically executives) with extra compensation.

Q: What kind of legal charges could companies face? But in general, backdating a stock option (without communicating this to shareholders) could run afoul of tax laws, securities regulations and laws prohibiting fraud. That's an expense that must be disclosed to shareholders.

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Federal officials on July 21 in San Francisco to announce civil and criminal charges relating to allegations of stock option backdating by former top executives of the networking-gear manufacturer.Then, after the announcement boosts the share price to $25, each option would be worth $5. "Then you have both insider trading and you have an accounting issue," Ryan said."An old-fashioned cooking-the-books fraud." Q: Would fixing executives' grant date to, say, July 1 every year fix things? tax code limits companies' ability to deduct pay for certain executives if the amount exceeds $1 million a year.Any of those three categories could yield civil (and perhaps criminal) legal action. Second, do the backdated options constitute "nonqualified deferred compensation," in which case the companies may be liable for excise taxes? If they had stock options that were backdated and not disclosed, that essentially provides executives (or other employees, but typically executives) with extra compensation.Q: What kind of legal charges could companies face? But in general, backdating a stock option (without communicating this to shareholders) could run afoul of tax laws, securities regulations and laws prohibiting fraud. That's an expense that must be disclosed to shareholders.

million a year.

Any of those three categories could yield civil (and perhaps criminal) legal action. Second, do the backdated options constitute "nonqualified deferred compensation," in which case the companies may be liable for excise taxes? If they had stock options that were backdated and not disclosed, that essentially provides executives (or other employees, but typically executives) with extra compensation.

Q: What kind of legal charges could companies face? But in general, backdating a stock option (without communicating this to shareholders) could run afoul of tax laws, securities regulations and laws prohibiting fraud. That's an expense that must be disclosed to shareholders.