Spread of options backdating Live video chat no registration

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

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).

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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.

Additionally, companies can use backdating to produce greater executive incomes without having to report higher expenses to their shareholders, which can lower company earnings and/or cause the company to fall short of earnings predictions and public expectations.

Corporations, however, have defended the practice of stock option backdating with their legal right to issue options that are already in the money as they see fit, as well as the frequent occurrence in which a lengthy approval process is required.

have led to the resignation of dozens of top executives and investigations by the Securities and Exchange Commission and federal prosecutors. 29, Apple discussed the report and accounted for the impact of the earnings restatements in its 10-Q.

But the options scandal has never touched a more exciting company than Apple or a more thrilling executive than Jobs. In June 2006, a special committee of Apple outside directors, chaired by former Vice President Al Gore, hired its own attorneys to investigate options backdating at the company. It turns out there were literally thousands of examples of backdating at Apple—6,428 options grants on 42 dates over a period of several years.

Options backdating is the practice of altering the date a stock option was granted, to a usually earlier (but sometimes later) date at which the underlying stock price was lower.

/share in profit (

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 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.

Additionally, companies can use backdating to produce greater executive incomes without having to report higher expenses to their shareholders, which can lower company earnings and/or cause the company to fall short of earnings predictions and public expectations.

Corporations, however, have defended the practice of stock option backdating with their legal right to issue options that are already in the money as they see fit, as well as the frequent occurrence in which a lengthy approval process is required.

have led to the resignation of dozens of top executives and investigations by the Securities and Exchange Commission and federal prosecutors. 29, Apple discussed the report and accounted for the impact of the earnings restatements in its 10-Q.

But the options scandal has never touched a more exciting company than Apple or a more thrilling executive than Jobs. In June 2006, a special committee of Apple outside directors, chaired by former Vice President Al Gore, hired its own attorneys to investigate options backdating at the company. It turns out there were literally thousands of examples of backdating at Apple—6,428 options grants on 42 dates over a period of several years.

Options backdating is the practice of altering the date a stock option was granted, to a usually earlier (but sometimes later) date at which the underlying stock price was lower.

,000 in total).

spread of options backdating-18spread of options backdating-44

The investigation "found that CEO Steve Jobs was aware or recommended the selection of some favorable grant dates." The committee hastens to add that Jobs "did not receive or financially benefit from these grants or appreciate the accounting implications." In other words, he didn't recommend backdating his own option grants.

In 1972, a new revision (APB 25) in accounting rules resulted in the ability of any company to avoid having to report executive incomes as an expense to their shareholders if the income resulted from an issuance of “at the money” stock options.

In essence, the revision enabled companies to increase executive compensation without informing their shareholders if the compensation was in the form of stock options contracts that would only become valuable if the underlying stock price were to increase at a later time.

And he never cashed in those options because they were replaced in 2003 by a grant of restricted stock.

CEOs at other companies have been forced to resign for such activities. His job may be saved by the fact that he did not directly profit.

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