Ceo pay backdating
The SEC’s opinions regarding backdating and fraud were primarily due to the various tax rules that apply when issuing “in the money” stock options vs.the much different – and more financially beneficial – tax rules that apply when issuing “at the money” or "out of the money" stock options.Most shareholder approved option plans prohibit in-the-money option grants (and thus, backdating to create in-the-money grants) by requiring that option exercise prices must be no less than the fair market value of the stock on the date when the grant decision is made. For example, because backdating is used to choose a grant date with a lower price than on the actual decision date, the options are effectively in-the-money on the decision date, and the reported earnings should be reduced for the fiscal year of the grant.(Under APB 25, the accounting rule that was in effect until 2005, firms did not have to expense options at all unless they were in-the-money.Envy is at the root of the financial sector’s problems according to a new study.Greed has been blamed for most of Wall Street’s woes and the banking sector’s recent collapse, but two professors at Washington University in St. And, they warn, envy is driving top talent from the financial sector and could wreak even more havoc on the economy in the months to come.
This combination is referred to as Total Cash Compensation (TCC).The Wall Street Journal (see discussion of article below) pointed out a CEO option grant dated October 1998.The number of shares subject to option was 250,000 and the exercise price was (the trough in the stock price graph below.) Given a year-end price of , the intrinsic value of the options at the end of the year was (-) x 250,000 = ,750,000.When CEO compensation makes the headlines, it is usually for all the wrong reasons: sharply increasing salaries, abuse of perks, backdating options, and stratospheric severance pay coupled with poor performance.Yet the job of a CEO of a large quoted company is a tough one. Companies pay the going rate, and a dearth of talent means paying more to get the best. ROCKETING PAY Criticism of CEO pay levels is not surprising, given recent headlines.