-option grants, the role of company directors is coming under scrutiny.
The Securities and Exchange Commission is now examining whether directors who sit on more than one company board may have spread the practice of backdating stock-option grants, reports Bloomberg.
D) A general partner’s liability is limited by the amount of their investment.
7) Which of the following is/are an advantage of incorporation?
The back door distance between directors A and B is deemed to be two.
Now, a Wharton business school study found that CEOs with a back door link to someone on the compensation committee received, on average, $US453,688 ($A601,294) more than those without such a connection.
Dozens of companies are under investigation by the Securities and Exchange Commission for backdating stock options. Alternatively, a company could hit a low without actually backdating its options by granting awards just before a major (positive) earnings announcement, a practice known as "spring-loading." A more extreme and more clearly illegal practice was to say that an award was exercised on a date other than its actual exercise date.
Attorney's Office in Northern California has launched a series of investigations and in July issued criminal and securities fraud charges against two top executives at Brocade Communications. National concern about the practice has been spurred by a series of articles in the Wall Street Journal. Companies found to have practiced this could be forced to restate their earnings.
I examine the implications of the study in this piece.
The pattern was somewhat more common in technology companies, smaller companies, companies granting options to more executives and directors, and companies with higher stock price volatility.
Volatility is especially significant: 29% of companies with high volatility appear to have manipulated grant dates, compared to 13% of those with low volatility.
Divesh Sharma, a professor at Kennesaw State University whose research focuses on company clawback policies, told Market Watch that, until 2006, few companies had them.
“In 2003, there were only four, by my count,” he said. Suddenly in 2006, I counted 150.” According to Sharma, Wells Fargo had no policy until 2008. Bush signed the Emergency Economic Stabilization Act, which established the Troubled Asset Relief Program to bail out big banks battered by the financial crisis.