Companies backdating options tax treatment loss liquidating distributions

Posted by / 25-Aug-2017 03:19

This fact is often used as a reason to downplay the seriousness of the issue.

You’d think that shareholders wouldn’t tolerate the use of accounting sleight of hand to compensate executives while bypassing the traditional “selling, general, and administrative” line in the income statement.

But abuse of stock options has been allowed to perpetuate for years.

In all my reading of the backdating scandal coverage, I have yet to see a thorough analysis of the real victims of this scandal: shareholders.

Afterward, the number of suspicious grants dropped in half. (BRCM), a communications chip company, stands out as one of the best examples of how an excessive option plan can dilute shareholder interests.

The tech bubble of the late 1990s was a time when top-notch engineers and programmers routinely demanded generous stock option packages as inducement to sign on with public companies.

This practice requires at least a nominal investment on the part of the option holder if he or she wishes to exercise.

The CEO’s conflict of interest between short-term personal wealth maximization and long-term shareholder interests tends to tilt in the shareholders’ favor.

A review of Standard & Poor’s Execu Comp data for 1,800 leading companies indicates that from Sept.

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.

The practice of backdating options is not illegal as long as it is disclosed to shareholders.

But are options really as great for all parties as many have assumed?

The stock option “backdating” scandal has implicated several (mostly technology) companies over the past few months.

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17, 2001, through the end of the month, 511 top executives at 186 of these companies got stock option grants. They were worth about $325 million when granted, based on a standard method of valuing stock options.“At Stryker Corp., a Michigan maker of orthopedic products, onetime stock option committee member John Lillard said he didn’t regret the decision to award options nine days after the attack. 20, 2001, at the bottom of a sharp ‘V’ pattern in the share price.“Mr.

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