Sexlivechat for men - Ethics of options repricing and backdating

For example, suppose that yesterday an executive backdated some options to when the underlying stock was .00 (the low for the last 1.5 years ).Thus, the strike price for the stock would also be .00.Additionally, companies can use backdating to produce greater executive incomes without having to report higher expenses to their shareholders, which can lower company earnings and/or cause the company to fall short of earnings predictions and public expectations.

ethics of options repricing and backdating-37

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The practice of options backdating has landed many companies into the hotseat.

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.

Cases of backdating employee stock options have drawn public and media attention.

By doing so, the executive will be required to pay taxes on the value between the option's strike price and price of the stock when it was excercised.

Currently, this capital gains tax rate can be as high as 35%.

In 1972, a new revision (APB 25) in accounting rules resulted in the ability of any company to avoid having to report executive incomes as an expense to their shareholders if the income resulted from an issuance of “at the money” stock options.

In essence, the revision enabled companies to increase executive compensation without informing 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.

If stock's current price is .00 and 10,000 options are immediately excercised into shares and then sold, the executive will receive ,000 of pre-tax profit.

After accounting for the 35% captial gains taxes, net proceeds will be around ,500.

This time, he will only be paying 15% in capital gains taxes, which means his net proceeds post taxes will be ,500.

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