Corporate governance and backdating of executive stock options the best dating web site headlines

Beyond such negative controlling measures, a more positive empowering approach based on ethics may also be necessary.What ethical measures need to be taken to address the agency problem?Some companies, for example, could jeopardize debt covenants through changes in book value. While an earnings restatement is decidedly a noncash issue, options backdating could result in large cash out-flows.This is due to the fact that many companies usually took deductions for option exercises on their tax returns.

We conclude that while executive compensation schemes (e.g., stock options) were originally intended to help remedy the agency problem by tying together the interests of the executives and shareholders, these schemes may have actually become “part of the problem,” and that the solution ultimately depends upon whether directors and executives accept that all of their actions must be based on a set of core ethical values.The Center for Financial Research and Analysis (CFRA) performed a survey of the 100 companies with the greatest (as a percentage of revenues) pro forma options compensation in the pre-SOX period.Of those 100 companies, 17 had, on three or more occasions, option grant dates that were at or near 40-day stock price lows which were immediately followed by a significant stock increase.Along with this more lax disclosure requirement, companies may also have not had robust enough internal controls to catch those backdating without proper authority.Consider the pressure facing a large number of technology start-up companies that were competing intensely for talent and lacking the ability to compensate employees with cash.

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