recommended dating sites canada - Options backdating wsj

Although this practice gave the senior executives significant stock holdings, since the grant was issued at-the-money, the share price had to appreciate before the executives would actually earn a profit.A 1982 amendment to the tax code created an incentive for executives and their employers to work together to break the law.

In effect, a company could wait to issue options until a clear trough in the stock price emerged during the previous two months, then report that date as the strike date for issued options. Companies could still use their knowledge of future events to choose when to issue options, but the ability to cherry-pick a good price from the last 2 months is no longer possible.

Since new regulations make it more difficult to engage in this behavior today, it looks like the WSJ decided to pull some skeletons out of the closet for entertainment and educational value.

In 1972, a new revision (APB 25) in accounting rules resulted in the ability of any company to avoid having to report executive incomes as an expense to their shareholders if the income resulted from an issuance of “at the money” stock options.

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.

All stemming from the practice known as “options backdating.” Options backdating occurs when a company issues stock options on one date, but reports in its financials an earlier issue date to create a “strike” or exercise price equal to the earlier date’s lower price.

Another consequence is that the company underrepresents the real nature of an executive’s compensation, perpetuating the myth that options are performance-based incentive compensation.This week it was a well documented article on options backdating, when companies retroactively set the strike price for employee stock options.My previous employer, Vitesse Semiconductor (VTSS) and CEO Lou Tomasetta was profiled as one of the ‘accused’.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 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.Under previous regulations, corporations could wait 45 days or, in some cases, over a year to report options, thus providing ample time for backdating.

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