Stock Option Backdating was first brought to light by Erik Lie, associate professor of finance at the University of Iowa. He believes that at least 10% of all US corporate stock options were backdated. Before SOX (Sarbanes-Oxley) legislation of 2002, studies by Mr Lie and the Wall Street Journal showed that companies awarded their executives stock options at dates that immediately preceded a rise in the share price. Here are relevant articles on the subject: 1. http://money.cnn.com/2006/05/26/magazines/fortune/colvin_fortune_0612/ "Then Lie conducted the mother of all stock option studies, looking at 5,977 option grants between 1992 and 2002. In his paper, published a year ago, he found the same suspicious results as earlier researchers, only more pronounced. Further slicing and dicing the data, he discovered that unless executives possessed truly extraordinary abilities to forecast precise overall market movements, they had to be backdating the grants." 2. http://news.ft.com/cms/s/88217da0-f0f2-11da-9338-0000779e2340.html "The suspicion is that some companies used that window to backdate but, crucially, did not properly disclose and expense such action." 3. http://www.baltimoresun.com/business/bal-bz.hancock28may28001531,0,4521951.column "The bigger the difference between the strike price and what the stock sells for on the open market, the more an option is worth. If you have options to buy 100 IBM shares at $50 and IBM trades at $80, then the options are intrinsically worth $30 each, or $3,000. But if the strike price is lower - say $25, then the options are worth $55 each, or $5,500." Link to many other press mentions from the "source" http://www.biz.uiowa.edu/news/media.cfm http://blog.vangal.com |
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