Monster options backdating
Since at-the-money options require a firm's share price to appreciate in order for the executives to profit, they meet the criteria for performance based-compensation and therefore qualify as a tax deduction.
When senior executives realized that they could look backwards for the date during which their firm's stock was at its lowest trading price and then pretend that was the date they were issued the stock grants, a scandal was born.
The roots of the scandal date back to 1972, when an accounting rule was put in place permitting companies to avoid recording executive compensation as an expense on their income statements so long as the income was in the form of stock options that were granted at a rate equal to the market price on the day of the grant, often referred to as an at-the-money grant.
This enabled companies to issue enormous compensation packages to senior executives without notifying shareholders.
A business run without integrity is a scary proposition.
From a consumer's perspective, customers rely on companies to provide goods and services.
A series of two follow-up studies by professors at other universities suggested that the uncanny ability to time options grants could only have happened if the granters knew the prices in advance.
Monster’s board has taken corrective actions since learning of the fraud, the letter said.The process became so prevalent that some investigators believe 10% of the stock grants made nationwide were issued under these false pretenses.A Scandal Comes to Light A series of academic studies was responsible for bringing the backdating scandal to light.Law360, New York (March 3, 2010, PM EST) -- A federal judge has sentenced the former general counsel of Internet-based job services company Monster Worldwide Inc. District Judge Jed Rakoff of the Southern District of New York handed the sentence down to Myron Olesnyckyj on Tuesday, also ordering the lawyer to disgorge 1,000 in ill-gotten gains and fining him an additional ,000. to a year of probation for his role in the company's stock options backdating scandal, delivering a relatively light sentence in recognition of his cooperation with the government.