Plain Talk About Stock Options And Backdating: An Outline Of A New Model

Ordinarily, it is a good idea to stay away from a controversial subject, particularly in the heat of ongoing SEC and criminal investigations, until the dust settles. However, it appears from published reports that there exist some profound misunderstandings about stock options, the rules governing the same, and their function and utility in our tech-based, reward-for-risk, capitalist economy. Some fair minded observers are puzzled that so many boards and compensation committees were, in the late `90s and early part of this decade, cavalier about the strike price of stock options, even after the enactment of Sarbanes-Oxley. Many ask, why weren’t “they” scrupulously careful about making sure “fair market value” was determined using objective criteria applied in “good faith” (in line with Internal Revenue Code standards). . . Perhaps some perspective is in order.