But as yet another executive who was once close to Jobs comes under the backdating cloud, one has to wonder: Is Jobs as innocent as Apple Inc. Or is the government afraid to go after one of the most respected leaders of American business? You can put him up there with Bill Gates and Warren Buffett," said Peter Henning, a professor who studies white-collar crime at Wayne State University in Detroit and one of the few legal scholars still paying attention to stock-options backdating.
"If you are going to put a case against him, you had better be sure it's a strong case." To be sure, regulators have in the past gone after celebrity business leaders.
The companies involved in the recent scandal were backdating options to a time when the stock price was lower, making them immediately lucrative. stock options by claiming that they’re an incentive for performance: the executives get rich only if they do a good job and the stock goes up.
As it happens, companies are perfectly free to issue options priced below the current market: those are called “in the money” options, and they’re worth something right when they’re issued. But there’s a rule that companies have to follow when they issue “in the money” options: they have to disclose it in their financial statements. Unless executives can time-travel, though, it’s hard to make that case for backdated options.
It took until December that year until terms were finally agreed, at which point Apple’s stock price was now .01.
Backdating was then carried out to give Jobs a lower share price which, on paper, made him million richer. Ultimately, it seems that Jobs swapped these options for restricted stock of lesser value.
The Dating Game, by James Surowiechi, The New Yorker: ..
When news broke, earlier this year, that some companies had backdated stock-option grants ...
They’re valuable only if the stock price rises after you get them.
In its most basic form, backdating can range from the blatant falsification of a document to take advantage of a lower stock price to allowing executives to select a grant date during a specified period, for example during the 30 days after the grant is approved by the board or committee.
Although these practices involve different types of conduct, both create problems because the date when the exercise price is set is not the same as the date on which the option is awarded.
in order to make them more valuable, it seemed like a problem that would come and go quickly... What’s distinctive about this one is that the benefits companies got from backdating were so small.
Never, you might say, have so many cheated so much to gain so little.
The stock plans of many public companies prohibit the granting of below-market options; other companies disclose in their SEC reports that stock options are granted at market and prepare their financial statements on that basis.