Backdating problems

backdating problems-34

The thing I liked about the Journal's treatment of the Alexander case was how the reporter managed to be respectful toward the Namibian legal system while at the same time hinting to readers that not every society has the same attitude toward Option backdating scandals: how management accountants can help: backdating of employee stock options can have a significant negative effect on a public company.

Fifty-two companies currently under criminal investigation. Moreover, the company avoids having to expense the options as current compensation, thus increasing earnings in the near term.

Professor Lie concluded that the robust profitability of so many options was statistically impossible absent some artificial influence such as backdating.

Subsequently, the Securities and Exchange Commission (SEC) took an interest, followed by the securities plaintiffs' bar and many corporations. The practice of options backdating, apparently widespread from 1996 through 2002, is widely believed to have been short-circuited by the enactment of Sarbanes-Oxley in 2002.

But while options backdating may have a truncated life expectancy, its current impact is robust.