Backdating employee stock options


17-Aug-2016 13:16

backdating employee stock options-78

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The stock plans of many public companies prohibit the granting of below-market options; other companies disclose in their SEC reports that stock options are granted at market and prepare their financial statements on that basis.The term “backdating” refers to a number of option granting practices in which the reported grant date is different from the date on which the option is actually awarded, resulting in an option that is already “in-the-money” at the time of the grant.Law360, New York (June 15, 2006, AM EDT) -- It is virtually impossible to pick up a newspaper these days and not see an article about the ever-growing list of companies being caught up in investigations concerning allegations of backdated stock options.Despite the attention paid to this issue, little has been written explaining why backdating options is problematic and potentially illegal.

Technically, any options granted today should bear a strike price of .

In a backdated situation, however, the options would be granted today (August 16), but their listed day of granting would be June 1 in order to give the options a lower strike price.