Stock options backdating articles

In that case, corporate officers inserted backdated option grant dates into board of directors’ unanimous written consents that were transmitted to the compensation committee.

Options were also backdated for new employees to dates prior to the date employment actually commenced.

Companies might also need to consider disclosure about how the board or compensation committee considers such information when determining whether and in what amount to make those grants.

But even if no criminal charges are filed, the SEC still can bring a civil fraud action in federal court.

This sort of case can be brought against the corporation and its officers and directors and can result in the disgorgement of profits, stiff monetary penalties, and prohibitions against officers and directors serving any public company in those capacities in the future.

As in other enforcement areas, the SEC has a penchant for pursuing through civil actions matters that involve blatant and intentional misconduct.

In addition, hundreds of thousands of backdated options were issued to fictitious employees and parked in a slush fund to be awarded at the CEO’s discretion.

Not surprisingly, the defendants themselves earned millions of dollars from backdated options.

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SEC investigations, lawsuits, terminations, and even criminal prosecutions followed in the great stock option backdating scandal.

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