Option backdating example

In essence, the revision enabled companies to increase executive compensation without informing their shareholders if the compensation was in the form of stock options contracts that would only become valuable if the underlying stock price were to increase at a later time.

The practice of “backdating” stock option grants has recently captured the attention of regulators, prosecutors, the plaintiffs’ bar, shareholders and the media.

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The company would then grant the option but date it at or near its lowest point.This is the granted option that would be reported to the SEC.The act of options backdating has become much more difficult as companies are now required to report the granting of options to the SEC within two business days.This is a way of repricing options to make them valuable or more valuable when the option "strike price" (the fixed price at which the owner of the option can purchase stock) is fixed to the stock price at the date the option was granted.Cases of backdating employee stock options have drawn public and media attention.