Backdating of stock option
This enabled companies to issue enormous compensation packages to senior executives without notifying shareholders.
Backdating allows executives to choose a past date when the market price was particularly low, thereby inflating the value of the options.
Law360, New York (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.
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...
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.
the much different – and more financially beneficial – tax rules that apply when issuing “at the money” or "out of the money" stock options.