Michael dell options backdating
Corporations, however, have defended the options of stock option backdating with their legal right to issue options that are already in the money as they see fit, as well as the frequent occurrence in which a lengthy approval process is required.
In essence, the revision enabled companies to increase executive compensation without stock their shareholders if the compensation was in the form of stock options contracts that would only become valuable if the underlying stock price were to increase at a later time.
Options backdating is the practice of altering the date a stock option was granted, to a usually earlier but sometimes later date at which the underlying stock price was lower.
This is a way of repricing options to make them valuable or more valuable when the option " strike price " the fixed price at which the owner of the option can purchase stock is fixed to the stock price at the date the option was granted.
While options backdating is not always illegal,  it has been called "cheating the corporation in order to give the CEO more money than was authorized.
To be legal, backdating must be clearly communicated to the company shareholders, properly reflected in earnings, and properly reflected in tax calculations.
The other major way that backdating can backdating misleading to investors relates to the method by which the company accounts for the options.
According to the February 9, WSJ Page A3 article IRS Urges Companies to Pay Taxes Owed By Workers Unaware of Backdated Options the government will go after taxpayers on such options but will pursue the company for rank and file employees.
According to Section 83 of the Codeemployees who receive property from the employer must legal taxable income in the year in which that property vests i.
For instance, public companies generally grant stock options in accordance with a formal stock option plan approved by shareholders at an annual meeting.
Many companies' stock option plans provide that stock options must be granted at an exercise price no lower than fair market value on the date of the option grant.