Journal backdating

Further, at-the-money options are considered performance-based compensation, and can therefore be deducted for tax purposes even if executives are paid in excess of

Further, at-the-money options are considered performance-based compensation, and can therefore be deducted for tax purposes even if executives are paid in excess of $1 million (see Section 162(m) of the Internal Revenue Code).However, if the options were effectively in-the-money on the decision date, they might not qualify for such tax deductions.This made me think about the possibility that some of the grants had been backdated.I further found that the overall stock market performed worse than what is normal immediately before the grants and better than what is normal immediately after the grants.

||

Further, at-the-money options are considered performance-based compensation, and can therefore be deducted for tax purposes even if executives are paid in excess of $1 million (see Section 162(m) of the Internal Revenue Code).

However, if the options were effectively in-the-money on the decision date, they might not qualify for such tax deductions.

This made me think about the possibility that some of the grants had been backdated.

I further found that the overall stock market performed worse than what is normal immediately before the grants and better than what is normal immediately after the grants.

Remy Welling, a senior auditor at the IRS, was asked to sign the deal in late 2002.

Instead, she decided to risk criminal prosecution by blowing the whistle.

Unfortunately, these conditions are rarely met, making backdating of grants illegal in most cases.

million (see Section 162(m) of the Internal Revenue Code).However, if the options were effectively in-the-money on the decision date, they might not qualify for such tax deductions.This made me think about the possibility that some of the grants had been backdated.I further found that the overall stock market performed worse than what is normal immediately before the grants and better than what is normal immediately after the grants.

We interpret these findings as strong evidence that backdating explains most of the price pattern around ESO grants.

This pioneering study was published in the Journal of Finance in 1997, and is definitely worth reading.

In a study that I started in 2003 and disseminated in the first half of 2004 and that was published in Management Science in May 2005 (available at I found that stock prices also tend to decrease before the grants.

However, under the new FAS 123R, the expense is based on the fair market value on the grant date, such that even at-the-money options have to be expensed.) Because backdating is typically not reflected properly in earnings, some companies that have recently admitted to backdating of options have restated earnings for past years. The exercise price affects the basis that is used for estimating both the company's compensation expense for tax purposes and any capital gain for the option recipient.

Thus, an artificially low exercise price might alter the tax payments for both the company and the option recipient.

Search for journal backdating:

journal backdating-19journal backdating-43journal backdating-89journal backdating-41

Leave a Reply

Your email address will not be published. Required fields are marked *

One thought on “journal backdating”