The companies were awarding the options later but then marking the awards to earlier dates, when the stock's price was low.The reason for doing this was simple: stock options priced at or above where the stock is trading (aka, "out of the money" options) get favorable tax treatment compared to stock awards priced below the market price (aka, "in the money" options).Backdating was then carried out to give Jobs a lower share price which, on paper, made him million richer. Ultimately, it seems that Jobs swapped these options for restricted stock of lesser value.Today’s “Today in Apple history” is significant, though, because it was one of the big scandals which rocked Apple during its big climb back to the top in the mid-2000s. In the aftermath, Apple spokesman Steve Dowling said: “Following an exhaustive independent investigation, the special committee found no misconduct by Steve Jobs or any other current management.An example illustrates the potential benefit of backdating to the recipient.
ESOs are usually granted at-the-money, i.e., the exercise price of the options is set to equal the market price of the underlying stock on the grant date.But it all became worse than a pseudo-scandal, in fact.have led to the resignation of dozens of top executives and investigations by the Securities and Exchange Commission and federal prosecutors. 29, Apple discussed the report and accounted for the impact of the earnings restatements in its 10-Q.Because the option value is higher if the exercise price is lower, executives prefer to be granted options when the stock price is at its lowest.Backdating allows executives to choose a past date when the market price was particularly low, thereby inflating the value of the options.