Corporate governance stock option backdating
Aimee Soodan has experience in all areas of employee benefits with a concentration in US and international executive and equity compensation.She is exceptionally well-versed with respect to the tax, legal and administrative aspects of global equity programs., "her knowledge of global equity is absolutely incredible." Ms.Larger, publicly traded companies such as Starbucks, Southwest Airlines, and Cisco now give stock options to most or all of their employees.Many non-high tech, closely held companies are joining the ranks as well.While options are the most prominent form of individual equity compensation, restricted stock, phantom stock, and stock appreciation rights have grown in popularity and are worth considering as well.Broad-based options remain the norm in high-technology companies and have become more widely used in other industries as well.The pattern was somewhat more common in technology companies, smaller companies, companies granting options to more executives and directors, and companies with higher stock price volatility.
A stock option gives an employee the right to buy a certain number of shares in the company at a fixed price for a certain number of years.
Several companies have expressed their intent to restate financial statements due to option timing issues, and opportunistic attorneys have already filed derivative and class action lawsuits.
The author of the academic study who is credited with focusing regulators on this issue estimates that at least 10% of “at-the-money” grants of options to CEOs between 19—before Sarbanes-Oxley shortened the reporting period for option grants—were backdated.
New rules under the Sarbanes-Oxley Act have reduced the practice to 10% of the companies granting options.
Only 7.7% of companies filing within the new two-day reporting window for options grants show a pattern of backdating, compared to 19.9% of companies that did not meet the requirements.
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Traditionally, stock option plans have been used as a way for companies to reward top management and "key" employees and link their interests with those of the company and other shareholders.