Backdating executive

In the mid-2000s, an investigation by the Securities and Exchange Commission resulted in the resignations of more than 50 senior executives and CEOs at firms across the industry spectrum from restaurants and recruiters to home builders and healthcare.High-profile companies including Apple Computers, United Health Group, Broadcom, Staples, Cheesecake Factory, KB Homes, Monster.com, Brocade Communications Systems, Inc., Vitesse Semiconductor Corp.

In the past, granted options were only required to be disclosed to the Securities and Exchange Commission (SEC) within two months of the options being granted, which gives companies a window for backdating.The most common example of this is when executives sell the stock right after excercising in-the-money options in order to receive cash.By doing so, the executive will be required to pay taxes on the value between the option's strike price and price of the stock when it was excercised.Options backdating occurs when companies grant options to their executives that correspond to a day where there was a significantly lower share price.It is suspected that these situations are not a coincidence and that the board or executives were granted options based on a past date in order to make these options more profitable.