Stock option backdating example

The Sarbanese-Oxley Act mandated that stock options be filed within 2 days after they are granted (Find Law, 2002), mitigating the backdating problem.Before the Sarbanese-Oxley Act came into effect, option grants were reported using Form 5 which primary use is for the disclosure of "the transactions and holdings of directors, officers, and beneficial owners of registered companies" (Securities and Exchange Commission, n.d.).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.Because the option value is higher if the exercise price is lower, executives prefer to be granted options when the stock price is at its lowest.Furthermore, the form is required to be filed only "on or before the 45th day after the end of the issuer's fiscal year" (Securities and Exchange Commission, n.d.).This essentially means that if the stock options were granted early in the fiscal year, investors would not come to know of them until almost 1 year later, giving more leeway for insiders to manipulate the date on which the exercise price was established.Google also offers a very successful email product called Gmail.Gmail is unique in that it allows the email account holder much more free space (7GB) than the average free email client.

His conversations with close to 50 convicted criminals so far have led to insights on hubris and humility — not just in them but in all of us.

Options backdating occurs when companies grant options to their executives that correspond to a day where there was a significantly lower share price.

It is suspected that these situations are not a coincidence and that the board or executives were granted options based on a past date in order to make these options more profitable.

“He sent this beautiful cursive handwritten letter joking how he doesn’t have Microsoft Word available in prison,” Soltes said during a recent interview with Fraud Magazine.

As global head of sales, Richards helped backdate contracts that clients signed after the quarters officially ended, Soltes says.