The act of options backdating has become much more difficult as companies are now required to report the granting of options to the SEC within two business days.
This adjustment to the filing window came in with the Sarbanes-Oxley legislation.
In the context of corporate governance, the illegal practice of setting the date of options awarded as part of executive compensation to a period when the stock price was very low (rather than setting the date of the options on the date the award was made).
The act of dating a document before the date it was actually signed.
Many of us dream of time traveling, either to change our past or foresee our future especially when viewing life from a financial perspective.
We generally ponder on our past financial decisions like, “Had I invested in ‘X’ stock five years back, I would have earned substantial returns by now.” However, the life insurance policyholders can stay delighted as they have the power to turn the clock back and change the start date of their policy to an earlier date.
The company would then grant the option but date it at or near its lowest point.
Backdating is usually illegal; for example, one may use backdating to evade taxes.
This process occurred when companies were only required to report the issuance of stock options to the SEC within two months of the grant date.
Companies would simply wait for a period in which the company's stock price fell to a low and then moved higher within a two-month period.
He pays the per share exercise price and can turn around and sell those shares on the exchange for each, netting a profit of per share, or ,000.
Granting stock options to employees is a generally accepted and perfectly legal form of compensating employees. Critics of backdating argue that the practice is difficult to detect and thus encourages boards and executives to use it to synthesize more creative compensation packages.
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.