Apple options back dating usan sex chat lines
You see, if you backdate stock options to a date when the price of the stock was lower, then the options are "in-the-money" when granted.
That means the company incurs an expense equal to the difference in the share price between the two dates.
The roots of the scandal date back to 1972, when an accounting rule was put in place permitting companies to avoid recording executive compensation as an expense on their income statements so long as the income was in the form of stock options that were granted at a rate equal to the market price on the day of the grant, often referred to as an at-the-money grant.
This enabled companies to issue enormous compensation packages to senior executives without notifying shareholders.
After all, stock option backdating is all the rage these days.
You'd think they'd be up to their eyeballs in rope.
The process became so prevalent that some investigators believe 10% of the stock grants made nationwide were issued under these false pretenses.
The study, published in 1997, identified a strange pattern of extremely profitable option grants, seemingly perfectly timed to coincide with dates on which the shares were trading at a low.I count no fewer than 38 top executives at 19 high-tech companies that have bit the dust over this stuff.We're talking top executives at big-name companies like Apple, Altera, Broadcom, Brocade, Cirrus Logic, Comverse, KLA-Tencor, Maxim, Mc Afee, Rambus, Sanmina-SCI, Take Two, Trident, Verisign, and Vitesse. That's serious fallout considering that options backdating is legit as long as the company reports it and accounts for it accurately.If you cover it up and fail to report that expense, the way Apple's folks allegedly did, well, that amounts to accounting fraud.While a few of those 38 terminations may turn out to be the result of such activity, it's likely that the vast majority fell on their swords to avoid sullying the good names of their companies.
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These changes reduced the likelihood of future backdating incidents. Check out Investopedia Academy's Options for Beginners course.