Take this example, from The Wall Street Journal, which began investigating the practice last fall: "Suppose an executive gets 100,000 options on a day when the stock is at .
Exercising them after it has reached would bring a profit of times 100,000, or million.
After 10 years on the lam in Namibia, ex-Comverse Technology CEO Jacob (Kobi) Alexander pleaded guilty Wednesday to securities fraud in Brooklyn Federal Court, then promptly thrown in jail by an irate judge who refused to release the fugitive fraudster on million bail.
A stock option gives the recipient the right to purchase stock at a set price.
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.
Reputation and regulation effects on director turnover and change of directorships - Review of Accounting and Finance - July (3rd Quarter/Summer) 16 2016 Director Turnover and Loss of Directorship: A study of Option Backdating Firms in the Post-SOX Era - Journal of Accounting and Finance - December 1 2014 Effectiveness of overlapping board structure on CEO compensation, firm performance and accrual quality - Quarterly Journal of Finance & Accounting - December 1 2012 Stock option backdating at Comverse Technology: Ethical, Regulatory and Governance Issues - Journal of the International Academy for Case Studies - September 2011 Stock option backdating at Comverse Technology: Ethical, Regulatory and Governance Issues, Instructors’ Note - Journal of International Academy for Case Studies - September 2011 The impact of regulatory change and the SEC’s investigation on option-backdating firms’ corporate governanc - Advances in Accounting - December 1 2011 Does the disclosure of corporate governance structures affect firms’ earnings quality?
- Review of Accounting and Finance - July (3rd Quarter/Summer) 2010 Cross-listing Foreign Firms’ Earnings Informativeness, Earnings Management and Corporate Governance under SOX - The International Journal of Accounting - March 2009 Embezzlement at San Chou College - IMA EDUCATIONAL CASE JOURNAL - February 2009 Embezzlement at San Chou College: Teaching Note - IMA Educational Case Journal - February 2009 Does audit committee independence improve information content of earnings under the Sarbanes-Oxley Act?