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The process became so prevalent that some investigators believe 10% of the stock grants made nationwide were issued under these false pretenses.A series of academic studies was responsible for bringing the backdating scandal to light.The process of granting an option that is dated prior to the date that the company granted that option.In this way, the exercise price of the granted option can be set at a lower price than that of the company's stock at the granting date.

This enabled companies to issue enormous compensation packages to senior executives without notifying shareholders.This process makes the granted option in-the-money and of value to the holder.This process occurred when companies were only required to report the issuance of stock options to the SEC within two months of the grant date.A series of two follow-up studies by professors elsewhere suggested that the uncanny ability to time options grants could only have happened if the granters knew the prices in advance.A Pulitzer Prize-winning story published in The Wall Street Journal finally blew the lid off of the scandal.

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