Options Backdating: Can I.T. Help?

By CIOinsight  |  Posted 06-15-2006
Options backdating, the latest scandal to hit corporate America, may be more widespread than anyone is willing to admit.

The SEC and New York Attorney General's office are investigating the practice, which involves changing the date on which stock options were issued so that the buy price is as low as possible. Stock options are supposed to cost whatever company shares were worth on the day the options are issued.

Change the date on the options to the lowest share-price of the year, and your exec gets an instant increase in performance bonus.

The practice is increasingly common, especially in tech-savvy companies that rely on options to keep top talent. But it costs the company and shareholders a mint.

Experts on financial processes say it's almost impossible to stop, if the principles are determined to continue.

If that's true, what can be done to prevent this fraudulent practice in the future? Can information technology be used as a backstop?

Lead Story: I.T.'s Role in Stock Options

  • Q&A: Red Hat's CEO on avoiding options backdating problems.
  • List of tech companies under backdating options cloud
  • SEC Chairman Christopher Cox's recent comments on backdating options.