Aug articles on stock option backdating
Still, given that (a) backdating helps make earnings look better than they are; and (b) Jobs is a huge shareholder of Apple (10.12 million shares, as of last April), how could he not benefit from this behavior? Jobs recommended some backdating dates for other employees.It turns out that Jobs did, indeed, receive backdated options—just not at his own direction. 18, 2001, when the stock stood at .01, the company gave Jobs a monster 7.5-million-share options grant dated Oct. By doing so, the company gave Jobs million in compensation for which it did not account properly. It also pretended the options grant was approved at a special board meeting, when no such meeting occurred. He received a massive grant that was approved at a phantom board meeting, though he didn't know about the phony meeting.have led to the resignation of dozens of top executives and investigations by the Securities and Exchange Commission and federal prosecutors. 29, Apple discussed the report and accounted for the impact of the earnings restatements in its 10-Q.
That is, they grant their executives stock options with an exercise price (or price at which the employee can purchase the common stock at a later date) equivalent to the market price at the time of the option grant.
But Apple makes clear that Jobs was directly involved in some instances of backdating.
The investigation "found that CEO Steve Jobs was aware or recommended the selection of some favorable grant dates." The committee hastens to add that Jobs "did not receive or financially benefit from these grants or appreciate the accounting implications." In other words, he didn't recommend backdating his own option grants.
Backdating allows executives to choose a past date when the market price was particularly low, thereby inflating the value of the options.
An example illustrates the potential benefit of backdating to the recipient.
If the company sets the prices of the options grant well below the market price, they will instantaneously generate an expense, which counts against income.