Backdating legal definition
Stock options are promoted by their supporters as the most effective way to align executive and employee interests with those of shareholders.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.But long-term executive/shareholder interest alignment gets thrown out the window when unforeseen circumstances cause a temporary crash in a company’s stock.Executives can profit quickly at shareholders’ expense in such instances.
The number who received grants was 2.6 times as many as in the same stretch of September in 2000, and more than twice as many as in the like period in any other year between 1999-2003.“Ninety-one companies that didn’t regularly grant stock options in September did so in the first two weeks of trading after the terror attack. ‘If you believe the company is going to do well, and here is an external event that is affecting the market, and you’ve made a decision to reward executives, you go ahead with it,’ Mr. ‘Life goes on.’ …“At Stryker…post-9/11 stock option grants to several executives appear to have been initiated by the chairman and CEO at the time, John W. Brown would ‘periodically tell us if he thought the stock was attractive,’ and then the board would decide whether to award options, said Mr. Besides, he added, no one could have known whether the stock would rebound immediately or continue to slide.“Mr.
The SEC and other federal authorities are currently investigating more than 50 companies suspected of illegal, undisclosed options backdating practices, and the first criminal charges relating to these practices are expected shortly.