According to a study by Erik Lie, a finance professor at the University of Iowa, more than 2,000 companies used options backdating in some form to reward their senior executives between 19.
The SEC’s opinions regarding backdating and fraud were primarily due to the various tax rules that apply when issuing “in the money” stock options vs.
The practice sometimes also occurs in the insurance industry, whereby policy issuers make the effective date of a policy (or claim) earlier than the application date in order to obtain a lower premium for the customer (or obtain better claim results). When he was hired, the Company XYZ board of directors offered John an attractive salary as well as an annual grant of 1,000 Company XYZ stock options.
Those options give John the right but not the on the date of the grant.
She's saying that shareholders will naively think that the options were really granted on January 2, leaving them suspicious of springloading.
The transaction is added to an open batch for the entered transaction date.
If all batches for that date are closed, a new open batch for the date is automatically created.
Since so many people think this is an important point, I thought I'd do a post addressing just that contention. What I assume people mean is that granting in-the-money options is not illegal, so long as you account for it properly. But the whole point of backdating is to pretend that you're not granting in-the-money options when in fact you are.
And to say it's up to the bean-counters to catch this situation is silly, because the whole reason you're using phony dates is so that the bean-counters won't know what you really did.