Aug articles on stock option backdating
But ultimately, it can prove to be quite costly to shareholders.(To learn more, see .) Cost to Shareholders The biggest problem for most public companies will be the bad press they receive after an accusation (of backdating) is levied, and the resulting drop in investor confidence.
In the worst cases of options backdating abuse, the stock exchange on which the offending company's stock trades and/or regulatory bodies such as the Securities and Exchange Commission (SEC) or National Association of Securities Dealers can levy substantial fines against the company for perpetrating fraud.
(For more information, see .) The executives of companies involved in backdating scandals may also face a host of other penalties from a range of governmental bodies.
That is, they grant their executives stock options with an exercise price (or price at which the employee can purchase the common stock at a later date) equivalent to the market price at the time of the option grant.
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.
This adjustment to the filing window came in with the Sarbanes-Oxley legislation.