Ethics of stock option backdating

26-Feb-2018 09:44 by 3 Comments

Ethics of stock option backdating - for women dating knoxville tn

Law360 (April 29, 2010, PM EDT) -- The short answer is that there is nothing wrong with backdating stock options — if appropriate procedures are followed and the transactions are properly accounted for and disclosed.

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A series of multivariate show that measures we expect to be related to the effect of the scandal on the value of firms’ reputational capital and information risk are significantly related to changes in shareholders’ wealth.

Despite the attention paid to this issue, little has been written explaining why backdating options is problematic and potentially illegal.

This article will attempt to provide reasons why this issue is important, why civil and criminal authorities are investigating, and why it is critical that public companies who issued options over the past...

For example, assume that on January 1, 2014, a company's stock is selling for per share.

Also assume that the company's chief executive officer (CEO) is given a 4-year option grant covering the period from January 1, 2012, to January 1, 2016, and that on January 1, 2012, the stock was selling for per share.

For additional information please contact Emily Langlie, Public Affairs Officer for the United States Attorney’s Office, at (206) 553-4110 or Emily.

Law360 (June 15, 2006, AM EDT) -- It is virtually impossible to pick up a newspaper these days and not see an article about the ever-growing list of companies being caught up in investigations concerning allegations of backdated stock options.Excerpt: So much interest and concern over stock option backdating and repricing, evinced by so many individuals and organizations, bodes poorly for the legitimacy of the potential motives for such actions.Such actions cannot withstand examination under any ethical test and should raise concern among investors, creditors, executives, and boards of directors.Conversely, variables one would expect to be related to the magnitude of direct out-of-pocket expenses, namely the number of past grants and/or their value, are not significantly related or are positively related to shareholders’ wealth effects, inconsistent with the direct cost hypothesis.In addition, consistent with this interpretation, the occurrence of government investigations or delisting notices have no incremental explanatory power, after controlling for firms’ likely culpability.The magnitude of the implied wealth changes seems too large to be attributed to any reasonable estimate of direct out-of-pocket costs of the backdating scandal or to the resulting legal penalties disclosed to date (direct cost hypothesis).

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