Backdating of stock option grants
Thank you so much for spending time today on this important topic.I thought I'd talk a little about where we are from an Enforcement perspective.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.Second, in September the Office of the Chief Accountant issued guidance for companies trying to cope with the financial reporting ramifications of their various historical options practices from a reporting perspective.On the other hand, companies could make in the money grants.
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.
Our Office of Economic Analysis then analyzed data and refined the areas of concern.
And in the Enforcement Division, we gathered information and data regarding specific cases to bring the issues into focus, culminating in our enforcement actions over the last several years. I am old enough to remember employee stock options as an anti-takeover device.
In this regard, we identified stock options grants as a potential trouble spot several years ago well ahead of the curve.
We examined the academic literature that quantified the potential issues.
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.