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Definition of 'Exercise Backdating'
A practice where option holders fraudulently claim to have exercised their call options at a specific time in the past, where in reality, the options were exercised much later. Exercise backdating is often performed by executives who wish to illegally reduce the amount of capital gains taxes they have to pay as a result of exercising the options.
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Investopedia explains 'Exercise Backdating'
An executive will save on capital gains tax if he or she sells shares that have been gained from options (which were exercised less than a year ago). The total amount of taxes on any realized profits could be as high as 35%. However, if those option-granted shares were held for over a year, the total amount of taxes paid could be reduced to as low as 15%. Since some executives have options where the total value of underlying securities are worth millions of dollars, so backdating the exercise date would save them tens of thousands of dollars in taxes.
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Search results for 'Exercise Backdating'
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http://www.investopedia.com/articles/optioninvestor/07/options_backdating.asp
... Most businesses or executives avoid options backdating; executives who receive stock
options as part of their compensation, are given an exercise price that is ...
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http://www.investopedia.com/articles/stocks/07/gross-up.asp
... couple of years. Plus, the exercise price could be tinkered (through
backdating) with to maximize an insider's profit. (To keep ...
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http://www.investopedia.com/articles/fundamental-analysis/08/executive-compensation.asp
... stock price goes up a little, management will be able to exercise options, convert ...
more extreme case, the executives may benefit from blatant options backdating ...
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http://www.investopedia.com/articles/analyst/091202.asp
... The Black-Scholes option-pricing model is a good academic exercise that works better
for traded ... (To learn more, see The Dangers Of Options Backdating, The "True ...
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http://stocks.investopedia.com/stock-analysis/2010/BPs-Management-Change-A-Good-Or-Bad-Thing-BP-MRK-UNH-BAC0727.aspx
... in order to maximize the profits for executives who exercise them. There was a gray
area in the accounting regulations at the time, so the backdating was not ...
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http://www.investopedia.com/articles/optioninvestor/07/evolvingoptions.asp
... 2005. (To learn more, see The Dangers Of Options Backdating. ... Exercise price of the
option. Expected term or duration of the option. Corporations ...
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http://www.investopedia.com/ask/options-and-futures/
... A Straddle. View Answer; All of these apply to an option exercise notice EXCEPT: ...
View Answer; How can unethical executives use options backdating to evade taxes? ...
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