Brocade options backdating. Spotlight on stock options backdating
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.
Is Backdating the New Corporate Scandal? The goal is to boost the recipient's potential windfall.
Trading Center Want to learn how to invest? As of 17 Novemberbackdating has been identified at more than companies, and led to the firing or resignation of more than 50 top executives and directors of those companies.
Although it may appear shady, public companies can typically issue and price stock option grants as they see fit, but this will all depend on the terms and conditions of their stock option granting program.
Although many companies have been identified as having problems with backdating, the severity of the problem, and the consequences, fall along a broad spectrum.
To be clear, the majority of public companies handle their employee stock options programs in the traditional manner. Two mail fraud charges were later dropped for both defendants. In this litigious society, shareholders will almost certainly file a class-action lawsuit against the company for filing false earnings reports.
Jensen's defense countered such testimony, saying that the executive lacks the financial background to know the company was improperly reporting compensation for its options grants.
Backdating of option grants, which can increase the profit employees make on the options, is legal as long as it is disclosed and accounted for. This is thanks to Sarbanes-Oxley. Some of the more prominent corporate figures involved in the controversy currently are Steve Jobs and Michael Dell.
Beyer claimed Jensen had further instructed him against sending any e-mails referring to the company's backdating.
Make informed decisions.
The problem with this practice, according to the SEC, was that stock option backdating, while difficult to prove, could be considered a criminal act. Authorities alleged that Reyes and Jensen illegally inflated Brocade's earnings by hiding the backdating from investors and regulators.
This means they must wait for the stock to appreciate before making any money.
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