Background American stock options are a type of derivative contract that gives the holder the right to buy or company stock at a set price (strike price) during a specified period..
Employee stock options are offered as compensation in two different ways.
Infractions range from minor backdating over a short period, to a systematic backdating scheme spanning 20 years.
In 1999, even Microsoft encountered problems with its options scheme.
Financial economists held that agents or managers are effort-adverse (Jensen and Meckling 1976; Jensen and Murphy 1990), and rewards, such as stock options tied to performance, are required to provide executives the incentive to supply effort, but more specifically, to supply effort which is consistent with the interest of stockholders.
while completing my Masters of Science in Accounting & Taxation at the University of Hartford.
The statistics can be staggering: .9 billion in fines, more than 120 companies under investigation.Because of these complexities, many companies are unable to keep all paperwork in line.As we will explore in the coming pages, stock option backdating is anything but a straightforward issue.In spite of the risks and legal approaches to backdating, executives are tempted to illegally backdate options.It is this curious incongruence that we set out to explore in the foregoing sections.