Definition
Options backdating is the practice of altering the date a stock option was granted, to a usually earlier date at which the underlying stock price was lower. This is a way of repricing options to make them valuable or more valuable when the option “strike price” is fixed to the stock price at the date the option was granted. Cases of backdating employee stock options have drawn public and media attention.
Backdating
What is ‘Backdating’
Backdating is dating any document by a date earlier than the one on which the document was originally drawn up. Under most circumstances, backdating is seen as fraudulent and illegal, although there are some situations in which backdating can be used in a legal and beneficial way, such as backdating a claim for a past period.
Explaining ‘Backdating’
Sometimes certain claims (such as insurance claims) can be backdated if the could not be completed at an earlier date, although there must be good reason for neglecting to claim in advance. If your backdated claim is approved, you will be able to receive benefits from a certain date in the past.
Further Reading
- Option backdating and board interlocks – academic.oup.com [PDF]
- The economic impact of backdating of executive stock options – heinonline.org [PDF]
- Corporate governance and backdating of executive stock options – onlinelibrary.wiley.com [PDF]
- Does backdating explain the stock price pattern around executive stock option grants? – www.sciencedirect.com [PDF]
- The impact of the options backdating scandal on shareholders – www.sciencedirect.com [PDF]
- Discussion of “The impact of the options backdating scandal on shareholders” and “Taxes and the backdating of stock option exercise dates” – www.sciencedirect.com [PDF]
- Reputation penalties for poor monitoring of executive pay: Evidence from option backdating – www.sciencedirect.com [PDF]
- Executive turnover following option backdating allegations – meridian.allenpress.com [PDF]
- Taxes and the backdating of stock option exercise dates – www.sciencedirect.com [PDF]
- Option grant backdating investigations and capital market discipline – www.sciencedirect.com [PDF]
