Back dating stock

But abuse of stock options has been allowed to perpetuate for years.

In all my reading of the backdating scandal coverage, I have yet to see a thorough analysis of the real victims of this scandal: shareholders.

If the stock increased to a share, the holder could exercise the option, pay /share to acquire the stock, then turn around and sell it for /share, earning

But abuse of stock options has been allowed to perpetuate for years.In all my reading of the backdating scandal coverage, I have yet to see a thorough analysis of the real victims of this scandal: shareholders.If the stock increased to $11 a share, the holder could exercise the option, pay $10/share to acquire the stock, then turn around and sell it for $11/share, earning $1/share in profit ($1,000 in total).If the stock dropped below $10/share, the stock would be "under water"; therefore, the option would not be exercised, since the stock price is lower than the cost of exercising the option.Unlike the abusive corporate tax shelter ploys which often involve complex manipulation of a transaction to achieve tax results that are inconsistent with the economic reality of the deal, stock option backdating is a relatively crude device: A corporation merely changes the date that a stock option was actually granted to an earlier time when the stock price was lower.

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But abuse of stock options has been allowed to perpetuate for years.

In all my reading of the backdating scandal coverage, I have yet to see a thorough analysis of the real victims of this scandal: shareholders.

If the stock increased to $11 a share, the holder could exercise the option, pay $10/share to acquire the stock, then turn around and sell it for $11/share, earning $1/share in profit ($1,000 in total).

If the stock dropped below $10/share, the stock would be "under water"; therefore, the option would not be exercised, since the stock price is lower than the cost of exercising the option.

/share in profit (

But abuse of stock options has been allowed to perpetuate for years.In all my reading of the backdating scandal coverage, I have yet to see a thorough analysis of the real victims of this scandal: shareholders.If the stock increased to $11 a share, the holder could exercise the option, pay $10/share to acquire the stock, then turn around and sell it for $11/share, earning $1/share in profit ($1,000 in total).If the stock dropped below $10/share, the stock would be "under water"; therefore, the option would not be exercised, since the stock price is lower than the cost of exercising the option.Unlike the abusive corporate tax shelter ploys which often involve complex manipulation of a transaction to achieve tax results that are inconsistent with the economic reality of the deal, stock option backdating is a relatively crude device: A corporation merely changes the date that a stock option was actually granted to an earlier time when the stock price was lower.

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But abuse of stock options has been allowed to perpetuate for years.

In all my reading of the backdating scandal coverage, I have yet to see a thorough analysis of the real victims of this scandal: shareholders.

If the stock increased to $11 a share, the holder could exercise the option, pay $10/share to acquire the stock, then turn around and sell it for $11/share, earning $1/share in profit ($1,000 in total).

If the stock dropped below $10/share, the stock would be "under water"; therefore, the option would not be exercised, since the stock price is lower than the cost of exercising the option.

,000 in total).

If the stock dropped below /share, the stock would be "under water"; therefore, the option would not be exercised, since the stock price is lower than the cost of exercising the option.

They are supposed to transform executives from fly-by-night plunderers in the mold of former Tyco or World Com executives into rational leaders who make prudent, long-term-oriented decisions with shareholder capital.

With more criminal charges in the pipeline, companies and executives need to understand the potential scope of criminal liability. ('Securities Act'); Securities Exchange Act of 1934, 15 U. Tax Fraud Executives who used backdating practices may also face criminal prosecution for federal tax fraud. Therefore, to be criminally liable under the Code's criminal statutes, a person must 'willfully attempt[]to evade or defeat any tax imposed by [the federal government].' I.

There are three major areas of potential criminal liability for former executives involved in stock options backdating: securities fraud, tax fraud, and mail or wire fraud. Backdating only becomes illegal when executives fail to disclose the practice in financial reports, and fail to properly account for backdated options according to Generally Accepted Accounting Principles (GAAP) and the relevant tax laws. Three possible violations of the Internal Revenue Code ('Code') could create criminal liability for backdating: (1) exceeding the compensation deduction limits of Section 162(m), (2) failing to qualify options under the rules that govern incentive stock options in Section 422, and (3) violating the provisions of Section 409A regulating deferred compensation.

In some cases, the date of exercise, rather than the date of grant, was changed to an earlier date to convert ordinary income into capital gains.

In general, companies engaging in a classic backdating transaction chose a date when the stock price was at a low point and chose that favorable date as the grant date.

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(who broke the backdating story), Jobs had an award of 7.5 million shares approved at Apple’s August 29 board meeting, at which point Apple’s share price was $17.83.

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