Performance-based compensation, on the other hand, was deductible.
Options backdating is the practice of altering the date a stock option was granted, to a usually earlier (but sometimes later) date at which the underlying stock price was lower.
This is the granted option that would be reported to the SEC.
High-profile companies including Apple Computers, United Health Group, Broadcom, Staples, Cheesecake Factory, KB Homes, Monster.com, Brocade Communications Systems, Inc., Vitesse Semiconductor Corp.
and dozens of lesser-known technology firms were implicated in the scandal. .) Read on to find out how the scandal emerged, what brought it to and end and what you can learn from it now.
It is suspected that these situations are not a coincidence and that the board or executives were granted options based on a past date in order to make these options more profitable.
At first glance, call options represent the perfect way to tie an executive's level of compensation to the company's performance because as the company's share price increases, so does the payoff the executive will receive.
However, this concept is not perfect and there are ways that executives can take advantage of the way that options are granted in order to earn money.