Restricted stock backdating

For example, in early November 2006, United Health reported that it would have to restate earnings for the last 11 years, and that the total amount of restatement (related to improperly booked options expenses) could approach, or even exceed, 0 million. While reports of past indiscretions are likely to continue to surface, the good news is that companies will be less likely to mislead investors in the future. Prior to 2002, when the legislation was adopted, an executive didn't have to disclose their stock option grants until the end of the fiscal year in which the transaction or grant took place.

However, since Sarbanes-Oxley, grants must be filed electronically within two business days of an issue or grant.

On the surface - at least compared to some of the other shenanigans executives have been accused of in the past - the options backdating scandal seems relatively innocuous.

dating derek jeter who - Restricted stock backdating

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.

The well-known data storage company allegedly manipulated its stock options grants to ensure profits for its senior executives and then failed to inform investors, or to account for the options expense(s) properly.

(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.

Clearly, for those who own shares in companies that don't play by the rules, options backdating poses serious risks.

If the company is punished for its actions, its value is likely to drop substantially, putting a major dent in shareholders' portfolios.(To learn more, read .) In short, it is this failure to disclose - rather than the backdating process itself - that is the crux of the options backdating scandal. To be clear, the majority of public companies handle their employee stock options programs in the traditional manner.That is, they grant their executives stock options with an exercise price (or price at which the employee can purchase the common stock at a later date) equivalent to the market price at the time of the option grant.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.As a result, the company has been forced to recognize a stock-based expense increase of 3 million between 19. It has also been the subject of a civil and a criminal complaint.

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