Xxx web cams - Stock options backdating sarbanes oxley

But Glass Lewis, in the report, said the SEC has not enforced the two-day filing rule, possibly leading to many more instances of backdating.

More than 140 companies have launched internal reviews or are under government investigation over possible manipulation of stock option grant timing.

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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.

In our example, backdating the options is the same as giving John Doe a check for $35,000 -- without recording that $35,000 on the within two business days.

For instance, if the board meeting is on January 3, 2012, and Company XYZ stock closes at $45 per share that day, then the exercise price of John's 2012 stock are backdated, then his exercise price is only $15 per share.

He pays the $15 per share exercise price and can turn around and sell those shares on the exchange for $50 each, netting a profit of $35 per share, or $35,000.

At first glance, call options represent the perfect way to tie an executive's level of compensation to the company's performance because as the company's share price increases, so does the payoff the executive will receive.

However, this concept is not perfect and there are ways that executives can take advantage of the way that options are granted in order to earn money.

Typically, the grant date of the stock options is the same as the date of the board meeting.

This is important to note, because the grant date is what determines the exercise price on the options.

This content is available through Read Online (Free) program, which relies on page scans.

Since scans are not currently available to screen readers, please contact JSTOR User Support for access. I identify three option exercise strategies executives engage in, including (i) exercising with cash and immediately selling the shares, (ii) exercising with cash and holding the shares, and (iii) delivering some shares to the company to cover the exercise costs and holding the remaining shares.

“When we find late Form 4 filings where the price of the underlying stock increased materially between the purported grant date and the day the Form 4 was filed, we believe this raises legitimate questions about whether the grant was backdated.” The SEC could not be immediately reached for comment.

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