Apple corporation stock option backdating scandal

The basic idea was that many companies seemed to award stock options on days when their stocks were at low-points, which increased the value of the options when the stock increased and made the stock cheaper to buy for the executives.

The academics concluded that something funny was going on.

*For those of you scratching your head at the phrase "cy pres" here's a quick explantion.

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This process makes the granted option in-the-money and of value to the holder.

This process occurred when companies were only required to report the issuance of stock options to the SEC within two months of the grant date.

This is the granted option that would be reported to the SEC.

The act of options backdating has become much more difficult as companies are now required to report the granting of options to the SEC within two business days.

This adjustment to the filing window came in with the Sarbanes-Oxley legislation.

It was the pseudo-scandal launched by the Wall Street Journal's investigative unit, after its reporters began following up on an academic report that demonstrated many executive stock options awards were too well-timed to be plausible.

It distracted not only the media and the public, but the regulators and courts as well.

We'd all have been better off if backdating was seen for what it really was: a rational response to an irrational accounting rule.

Which, of course, you shouldn't assume since any sensible employee can see that if his each stock option is worth less, he should get more of them.

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