Sunday, June 18, 2006

Backdating stock options being investigated

Backdating scandal expands
Tougher regulations expected to restrict how stock options fit within executive compensation
- Carolyn Said, Chronicle Staff Writer
Sunday, June 18, 2006

Is it Enron all over again?

The stock-options backdating scandal continues to metastasize. Almost every day, reports come to light of yet another company under scrutiny for possible rigging of stock-option awards to executives.

About four dozen companies, including 17 in the Bay Area, are now under investigation to determine whether they retroactively changed option award dates to a time when the stock price was low, thereby padding the value of the options.

An option gives a person the right to buy stock in the future at a fixed price -- usually the price on the date the option is granted. The more the stock rises, the more the option is worth.

By selecting award dates when company stock prices were at or near their lowest, backdated options come with built-in profits for recipients. That undercuts the main intent of stock options: to motivate executives to increase the company's stock price.

Read the entire story here.


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