Backdating of stock option grants
In addition to the enforcement efforts, others at the Commission have taken two other major steps to address this issue.First, there are the recently adopted rules relating to executive compensation disclosure which specifically address options.For example, at the money options received more favorable accounting treatment they did not need to be expensed.They also generally received more favorable tax treatment.
While they offended corporate shareholders, had to be expensed by the corporation, and had less favorable tax consequences, they had other advantages.
At that time, in the eighties and nineties, stock options, often in the money, were granted to employees in the hope that a highly-motivated employee pool would put the company in a better position to resist in hostile takeover battles.
Over time, shareholders objected to the fact that the options were granted in the money and eventually many companies developed stock option plans in which grants could only be made at the money that is, at the closing price of the stock on the day of the grant.
With respect to both, there are pending parallel criminal actions as well.
As most of you know, the Comverse criminal case has had a certain amount of drama surrounding former CEO Kobi Alexander, who was first a fugitive from justice, and later was located after he took up residence in Namibia, where he is presently fighting extradition to the United States.