An analysis of the practice of backdating stock options and its legal implications.
Written in 2009; 1,513 words; 3 sources; MLA; $ 49.95
Paper Summary:
The paper discusses how when many companies' practices of backdating stock options were discovered, there was a huge outcry and demands for action. The paper relates, however, that while in some instances crimes were committed, by and large these companies managed to stay inside the boundaries of the law. The paper details why proving what companies did will be difficult if not impossible, and therefore considers the idea of making companies file an electronic report on the day the stock option is given. The paper concludes by positing that ethics are only as good as the criminal law behind them.
From the Paper:
"Backdating is the practice of marking a document with a date which is earlier than the actual date. For example a check can be backdated and then used in payment. After the check is cashed and returned to the writer, he then has a receipt, which seems to show he paid his bill or whatever earlier than he actually did. In a case where his bill was overdue it would make it appear as if he paid on time. It is generally not a crime, but if used to defraud it could prove to be a criminal act.
"In the matter of backdating stock options, it is not a crime if a specific set of requirements is followed to the letter. Whether it is declasse and slimy is a different question. The stockholders of the company are the ones who must pay for this type of manipulation, so by law, they must be informed that it is being done. The SEC seems to think there are a lot of companies which have not bothered to do this."
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