Shock Options: The Stock Options Backdating Scandal of 2006 and the SEC's Response

Abstract

This paper summarizes the recent stock options backdating scandal from the perspective of the Securities and Exchange Commission. The paper begins with a brief history of the stock options expensing debate. The paper continues with a discussion of the academic research that propelled the phenomenon of options backdating into the media and regulatory spotlight. The paper then examines three case studies of companies and executives charged by the Commission. The paper concludes with a brief analysis of the Commission's recent policy regarding company fines.

Keywords: Securities and Exchange Commission, stock options, backdating, corporate governance

JEL Classification: M14, G12, G34, G38, M21, M41, N20, N40