Stock options backdating issue oprah and tyler perry dating
Your investor relations department may be receiving calls from investors asking if you have a backdating problem.There may be a natural tendency to respond, possibly without having done any investigation, that the company has no problems or is not aware of any problems.Backdating could be accomplished either at the time of the grant, by arbitrarily selecting an earlier date when the stocks price was lower, or after the grant has been made, by retroactively changing the grant date.Published reports have highlighted some instances in which a companys stock price increased substantially shortly after the reported grant date, suggesting that backdating may have occurred.In November 2005, a publicly-traded company announced the resignation of three of its top executive officers following an SEC investigation into the backdating of stock option grants.
In several cases to date, investigations by the SEC or the Department of Justice are reported to have led to resignations or firings of senior management. Companies facing suspicions about their option grant practices can expect shareholder lawsuits, most likely in the form of derivative claims and/or class actions under the federal securities laws. Because every company has a different history and set of corporate practices, no one series of actions is necessarily appropriate for all.Until very recently, most companies accounted for stock option grants under APB 25.Under this method of accounting, if a stock option was granted at the money, then no compensation expense was recorded.If a company disclosed that stock options were granted at the money, but in fact the options were granted on a date when the fair market value of the underlying stock would have resulted in the options being in the money, the disclosure may have been inaccurate. Under a relatively recent addition to the Internal Revenue Code, Section 409A, stock options that are treated as deferred compensation arrangements that do not comply with Section 409A can result in regular plus an additional 20% income tax to the option recipient on the date(s) of option vesting, rather than on the date(s) of option exercise or sale of the underlying stock, plus interest on any such tax that should have been paid.The grant of an in the money stock option that is exercisable at any time following vesting may be treated as a non-compliant deferred compensation arrangement under this section of the IRC with these unfavorable tax consequences for the recipient.