Define backdating options
Law360, New York (June 15, 2006, AM EDT) -- It is virtually impossible to pick up a newspaper these days and not see an article about the ever-growing list of companies being caught up in investigations concerning allegations of backdated stock options.Despite the attention paid to this issue, little has been written explaining why backdating options is problematic and potentially illegal.The decline came largely as a result of changes in accounting rules and increased shareholder pressure to reduce dilution from equity awards in public companies.
Additionally, given my risk function and the risk function of VCs, this appears to be a better deal for everyone.I often talk to startups that claim that their compensation package has a higher expected value than the equivalent package at a place like Facebook, Google, Twitter, or Snapchat.One thing I don’t understand about this claim is, if the claim is true, why shouldn’t the startup go to an investor, sell their options for what they claim their options to be worth, and then pay me in cash?While options are the most prominent form of individual equity compensation, restricted stock, phantom stock, and stock appreciation rights have grown in popularity and are worth considering as well.Broad-based options remain the norm in high-technology companies and have become more widely used in other industries as well.
Companies are offering this benefit not just to top-paid executives but also to rank-and-file employees. The answers to these questions will give you a much better idea about this increasingly popular movement.