Backdating Options and Why Executive Compensation is Not All About Norms
Geoffrey A. Manne
International Center for Law & Economics (ICLE)
Joshua D. Wright
Federal Trade Commission; George Mason University School of Law
September 1, 2006
Corporate Governance Law Review, Vol. 2, No. 3, pp. 385-394, 2006
George Mason Law & Economics Research Paper No. 10-22
In this short essay we take on some of the common claims surrounding the law and economics of the backdating of options. Most of these claims are rooted in the basic argument that backdating options amounts to concealment of compensation. While we agree that backdating may have amounted to a technical rule violation in some cases, there is actually no concealment and, in fact, backdated options are fully disclosed when granted, and their value incorporated into stock price. We also challenge a few other myths surrounding the practice of backdating options.
Number of Pages in PDF File: 11
Keywords: accounting measures, corporate ignorance, corporate malfeasance, Gretchen Morgenstern, Jeff Lipshaw, Larry Ribstein, Matt Bodie, PrawfsBlawg, securities regulation, stock options, taxation of compensation
JEL Classification: D21, D23, G18, G30, G38, H25, H32, J33, J38, K22, K34, M40, M41, M52,Accepted Paper Series
Date posted: October 21, 2009 ; Last revised: May 28, 2010
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