Backdating news

A temporary ban from Google or Microsoft, even if for just one year, would kill Wo Sign's business, with clients moving to other certificate authorities.

Following last Friday's meeting, Qihoo 360 took a series of drastic measures to show it takes the incident seriously, and to avoid the fate of Diginotar, a CA that had to shut down following a ban from Google.

I count no fewer than 38 top executives at 19 high-tech companies that have bit the dust over this stuff.

ESOs are usually granted at-the-money, i.e., the exercise price of the options is set to equal the market price of the underlying stock on the grant date.

Because the option value is higher if the exercise price is lower, executives prefer to be granted options when the stock price is at its lowest.

In researching this post, I came across a number of recent reports on Henry Nicholas III, the once high-flying CEO and cofounder of Broadcom. While the story was enthralling, I didn't understand what any of it had to do with a federal investigation into stock option backdating.

The allegations of illicit sex, drugs, and rock and roll reminded me of the 60s ... Sure, Broadcom had to take a $2.2 billion charge to fix the accounting mess left by the company's former executives.

After all, stock option backdating is all the rage these days.

You'd think they'd be up to their eyeballs in rope.

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.

Corporations, however, have defended the practice 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 comparison, had the options been granted at the year-end price when the decision to grant to options actually might have been made, the year-end intrinsic value would have been zero.

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