A New Stock Option; Backdating, page 1

posted on Jun, 3 2006 @ 03:29 PM

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A major scandal is developing over corporations giving stock options to their top brass. The new twist is to backdate the shares to a point where the price was low, and selling them at a higher current price thus enriching top executives. As many as 30 companies are being investigated for this practice and that could be only the proverbial tip of the iceberg.

hosted.ap.org
NEW YORK (AP) -- Questionable perks bestowed on top corporate executives could be the next scandal to shake America's boardrooms, as the number of companies involved in a widening federal investigation into the timing of stock option grants grew on Monday.
The practice, if proven, meant executives were able to reap profit as their companies' stocks rose well above the options exercise price. Not only have some corporate officers ensnared in the investigation lost their jobs, but a former SEC head and other corporate governance experts project the inquiry could create a firestorm on Wall Street.
Beyond just regulatory problems, the practice of backdating stock options could cause many of these companies to restate earnings if improper stock-based compensation is on the books. Further, those that engage in the practice could face a wave of class-action lawsuits claiming companies violated disclosure laws by not reporting it, and executives breached their fiduciary duty to investors.

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A new wrinkle in an old game. It appeared that companies and their top executives were extremely lucky in timing the purchase or transfer of their stock options. They always seemed to buy low, in fact, the very lowest and sell at a handsom profit. But there really is no such thing as a free lunch, they were cheating. Maybe they just thought they were stickin it to the Man. Aren't they the Man?

Relentless

posted on Jun, 3 2006 @ 03:36 PM

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This is just great

Just what we need right now, more financial shennanigans so us little guys can get ripped. Can the market handle this kind of scandal?

St Udio

posted on Jun, 3 2006 @ 04:42 PM

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i believe this type of action has been going on for a decade at least.

any company which thought that this backdating practice might be unethical,
just went ahead and gave their top executives the rights to obtain interest free
loans from the corps. treasury...of course the 'loans' were eventually restructured as 'bonuses' or 'grants' which did not have to be repaid...ever...and the stock-options exercised had the same result as the backdating to the lowest price method.

These top exec class people, have a seperate code & laws & standards than the rest of us 'riffraff'.
......oh, on occasion there will be a highly publicized example made of one of their own which are then presented as outcasts/scapegoats/pariahs.

jsobecky

posted on Jun, 3 2006 @ 06:13 PM

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What a scumbag trick, back-dating. And they know full well who they are sticking it to - the average person with a small retirement portfolio.

Long Lance

posted on Jun, 4 2006 @ 01:39 PM

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Originally posted by Relentless
This is just great

Just what we need right now, more financial shennanigans so us little guys can get ripped. Can the market handle this kind of scandal?

What are you going to do? bury your pension fund in the woods and hope it won't be a parking lot by the time you plan to retire ? this is what the business is all about, giving power of the many to a few.

Relentless

posted on Jun, 4 2006 @ 02:47 PM

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Long - what are you saying? These are public corporations, one of which is an insurer (which has a whole other set of circumstances to consider). I must be misreading you because it sounds like you are saying we should just sit back and put up with it.

Long Lance

posted on Jun, 4 2006 @ 03:58 PM

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Originally posted by Relentless
Long - what are you saying? These are public corporations, one of which is an insurer (which has a whole other set of circumstances to consider). I must be misreading you because it sounds like you are saying we should just sit back and put up with it.

i don't know what to do about it, it affects the stock market in general, doesn't it? if stocks are manipulated - ususally, the insiders sell at huge surplus, the rest pays, who is 'the rest' - investors including funds pay the bills. ie. we pay the bills.

'putting up' with it will land us in poverty, obviously, but i honestly have no idea how not to lose in this system unless you are doing the stealing. the majority apparently believes they will retire as millionaires, but if the stocks are cyclically milked for all they're worth i can hardly see that happen. there's only so much money in the system and in the end, it all belongs to those who get to play with the controls.

sorry for the pessimistic outlook.