17, 2001, through the end of the month, 511 top executives at 186 of these companies got stock option grants. They were worth about 5 million when granted, based on a standard method of valuing stock options.“At Stryker Corp., a Michigan maker of orthopedic products, onetime stock option committee member John Lillard said he didn’t regret the decision to award options nine days after the attack. 20, 2001, at the bottom of a sharp ‘V’ pattern in the share price.“Mr.
But the great majority of public companies issue options with an exercise price equal to the market price at the date of grant.
The SEC and other federal authorities are currently investigating more than 50 companies suspected of illegal, undisclosed options backdating practices, and the first criminal charges relating to these practices are expected shortly.
The practice of backdating options is not illegal as long as it is disclosed to shareholders.
This practice requires at least a nominal investment on the part of the option holder if he or she wishes to exercise.
The CEO’s conflict of interest between short-term personal wealth maximization and long-term shareholder interests tends to tilt in the shareholders’ favor.