Corp backdating

02-Jun-2016 07:36 by 6 Comments

Corp backdating

Looking backward, I'll ruminate a little about how we got here, and finally, at the risk of appearing to be or worse, actually being the secular equivalent of a sanctimonious twit, offer some thoughts looking forward on lessons we might take away from all of this. I have reached the point in life where I view the world through ridiculously expensive progressive lenses, but I guarantee you these lenses are not rose-colored. To recap much of what you may already have read or heard, the Division of Enforcement is investigating over 100 matters relating to potential abuses of employee stock options.I should begin of course where I always do — with a disclaimer. The investigations are being conducted by SEC offices throughout the country and are being centrally coordinated and tracked here in Washington.

They also generally received more favorable tax treatment.At the money options and other forms of performance-based compensation became even more attractive when the

They also generally received more favorable tax treatment.At the money options and other forms of performance-based compensation became even more attractive when the $1 million salary deductibility cap was enacted.So, from the shareholder, accounting and tax perspectives, at the money options had certain distinct advantages.In the money grants offered instant paper gains and the prospect of future wealth that was obviously attractive to employees, some of whom were themselves entrusted to decide precisely when options would be granted.In the late 1990s, companies were facing intense competition to hire and retain the best and brightest employees.Taking a very different tack, Comverse's former CFO, David Kreinberg, last week became the first top level executive to settle actions brought by the SEC and the US Attorneys' Office since options backdating came into the media spotlight last Spring.

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They also generally received more favorable tax treatment.

At the money options and other forms of performance-based compensation became even more attractive when the $1 million salary deductibility cap was enacted.

So, from the shareholder, accounting and tax perspectives, at the money options had certain distinct advantages.

In the money grants offered instant paper gains and the prospect of future wealth that was obviously attractive to employees, some of whom were themselves entrusted to decide precisely when options would be granted.

In the late 1990s, companies were facing intense competition to hire and retain the best and brightest employees.

Taking a very different tack, Comverse's former CFO, David Kreinberg, last week became the first top level executive to settle actions brought by the SEC and the US Attorneys' Office since options backdating came into the media spotlight last Spring.

million salary deductibility cap was enacted.So, from the shareholder, accounting and tax perspectives, at the money options had certain distinct advantages.In the money grants offered instant paper gains and the prospect of future wealth that was obviously attractive to employees, some of whom were themselves entrusted to decide precisely when options would be granted.In the late 1990s, companies were facing intense competition to hire and retain the best and brightest employees.Taking a very different tack, Comverse's former CFO, David Kreinberg, last week became the first top level executive to settle actions brought by the SEC and the US Attorneys' Office since options backdating came into the media spotlight last Spring.

In settling with the SEC, the former Comverse CFO consented to, among other sanctions, a permanent injunction against violation of the securities laws, a permanent bar against serving as a corporate officer or director, and payment of .4 million in disgorgement and pre-judgment interest.

At that time, in the eighties and nineties, stock options, often in the money, were granted to employees in the hope that a highly-motivated employee pool would put the company in a better position to resist in hostile takeover battles.

Over time, shareholders objected to the fact that the options were granted in the money and eventually many companies developed stock option plans in which grants could only be made at the money — that is, at the closing price of the stock on the day of the grant.

In the past few years, we brought two other cases involving option issues in the context of allegations relating to broader financial frauds — one in 2003 involving Peregrine and one in 2004 involving Symbol Technologies.

We do not expect to bring 100 enforcement cases regarding stock options — we are focusing on the worst conduct. To be a little less enforcement-centric, I would also like to talk about where the Commission as a whole is on stock option matters.

These rules, in combination with the prescient provisions of Sarbanes-Oxley requiring timely reporting of stock option grants, will go a very long way toward preventing the kinds of problems we are seeing today from occurring to the same degree in the future.

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