options dating scandal

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Home Previous Page. Trident Microsystems, Inc. Lin, and Peter Y. Jen, Litigation Release No. Anthony Bonica, Litigation Release No. Carl W. Jasper, Litigation Options dating scandal No. Byrd SEC v.

Before the clamor about the lack of prosecutions from the financial crisis and the current crackdown on insider trading, the practice of backdating stock options came to light seven years ago and prompted a flurry of prosecutions. For those whose memories have faded, options backdating became known publicly in March when a Wall Street Journal article questioned whether executives selected an earlier date for the price at which options could be exercised, effectively giving them a lower price and making them more valuable. A number of companies — particularly those in the technology industry, which gave out stock options like candy on Halloween — began internal investigations into their awards. Because publicly traded corporations must properly report the value of options on their financial options dating scandal, any backdating could result in a misstatement that can be the basis for a charge of securities fraud. Charges were eventually filed in a number of different jurisdictions against executives responsible for approving the practices, usually accompanied by a parallel civil enforcement action by the Securities and Exchange Commission. But a few tied in with backdating were never accused of wrongdoing, like Steven P. Jobs at Apple. That office obtained the most notable conviction from this era involving the former Brocade Communications chief executive, Gregory Reyes.

Options backdating is the practice of altering the date a stock option was granted, to a usually earlier but sometimes later date at which the underlying stock price was lower. This is a way of repricing options dating scandal 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.
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Backdating Options: Stock options are promoted by their supporters as the most effective way to align executive and employee interests with those of shareholders. They are supposed to transform executives from fly-by-night plunderers in the mold of former Tyco or WorldCom executives into rational leaders who make prudent, long-term-oriented decisions with shareholder capital. But are options really as great for options dating scandal parties as many have assumed? The SEC and other federal authorities are currently investigating more than 50 companies suspected of illegal, undisclosed options backdating practices, and options dating scandal first criminal charges relating to these practices are expected shortly. The practice of backdating options is not illegal as long as it is disclosed to shareholders. This fact is often used as a reason to downplay the seriousness of the issue.

In this way, the exercise price of the granted option can be set at a lower price than that of the company's stock at the granting date. This process makes the granted option "in the money" and of value to the holder. This process occurred when companies were options dating scandal required to report the issuance of stock options to the SEC within two months of the grant date. Companies would simply wait for a period in which the company's stock price fell to a low and then moved higher within a two-month period. 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 became much more difficult after companies were required to report the granting of options to the SEC within two business days. This adjustment to the filing window came with the Sarbanes-Oxley legislation.

But a recent papercoauthored by Robert M. Daines of Stanford University, has unearthed a new and potentially more sinister version of options dating scandal scheme — call it Dating Game 2. Under Dating Game 1. Revelations about backdating came to light in and sparked outrage on many fronts.
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