Backdating option grants
“We thought that enough time had passed to see if these issues had been settled,” Seyhun said.
“There was a feeling especially among the legal community that this practice was done, that there’s no more backdating, everyone has been punished, and the issue could be laid to rest.” Seyhun and Ross School colleagues Cindy Schipani, professor of business law, and visiting researcher S. They found that the majority of companies studied are engaged in some sort of unethical practice that benefits top executives by an average of 6 percent in increased stock returns.
RT Pro Exec is an insurance intermediary focused exclusively on management liability issues...
ANN ARBOR—A decade after the stock option backdating scandal broke and then seemed to die down after some civil and criminal prosecutions, the practice appears to have resurrected itself.
The act requires that options be reported within two days of their award.Burcu Avci reviewed all option grants—20 billion share awards—to executives in publicly listed firms in the U. “Although each individual manipulation may have a small marginal impact on compensation, collectively, this amount is significant,” Schipani said.Besides backdating, the practices include spring-loading, or releasing positive news about the company just prior to the option grant date, and bullet-dodging, releasing negative news just after the option grant date.Schipani said that “when executives time the release of information to increase their personal wealth, they are misleading shareholders.” “We were surprised at how small the amounts were that they were going after.The average was 0,000, which is a small amount relative to their total compensation,” Seyhun said. They looked at it as money that was just sitting there to be taken.” The practices were much more prevalent at small-cap and high-technology firms, he said.