Exercise backdating anonymity and online dating
The Bottom Line Although more culprits in the options backdating scandal are likely to emerge, because standards such as Sarbanes-Oxley have been instituted, the assumption is that it will be more difficult for public companies and/or their executives to hide the details of equity compensation plans in the future.
These example sentences are selected automatically from various online news sources to reflect current usage of the word 'backdate.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. In the finance world, backdating usually refers to the practice of changing the dates of option grants to one that is earlier than the actual grant date in order to place a lower exercise price on the options and thus enhance the potential profits from the exercise of those stock options.
Do you ever wish that you could turn back the hands of time?
Some executives have, well, at least when it comes to their stock options.
If the company sets the prices of the options grant well below the market price, they will instantaneously generate an expense, which counts against income.
The backdating concern occurs when the company does not disclose the facts behind the dating of the option.
They also fully disclose this compensation to investors, and deduct the cost of issuing the options from their earnings as they are required to do under the Sarbanes-Oxley Act of 2002.
But, there are also some companies out there that have bent the rules by both hiding the backdating from investors, and also failing to book the grant(s) as an expense against earnings.
In a worst-case scenario, bad press and restatements may be the least of a company's worries.Although the company continues to defend itself against the charges, its stock has dropped by more than 70% between 20. According to a 2005 study by Erik Lie at the University of Iowa, more than 2,000 companies used options backdating in some form to reward their senior executives between 19.In addition to Brocade, several other high profile companies have become embroiled in the backdating scandal as well.(For more information, see .) The executives of companies involved in backdating scandals may also face a host of other penalties from a range of governmental bodies.Among the agencies that could be knocking on the door are the Justice Department (for lying to investors, which is a crime), and the IRS for filing false tax returns.
A Real-Life Example A perfect example of what can happen to companies that don't play by the rules can be found in a review of Brocade Communications.