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ARTICLE · 06 JUNE 2006

Stock Option Backdating: the Latest “Hot Issue”

Cooley LLP
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In November 2005, a publicly-traded company announced the resignation of three of its top executive officers following an SEC investigation into the backdating of stock option grants. Since then, more than 20 companies have announced the formation of independent committees to investigate option granting practices or the existence of a government investigation into their option grants.

United StatesLitigation, Mediation & Arbitration
Barbara Borden
Barbara Borden
John Dwyer
John Dwyer
William Freeman
William Freeman
Koji Fukumura
Koji Fukumura
Ross Nadel
Ross Nadel
Neal Stephens
Neal Stephens
Brett White
Brett White
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In November 2005, a publicly-traded company announced the resignation of three of its top executive officers following an SEC investigation into the backdating of stock option grants. Since then, more than 20 companies have announced the formation of independent committees to investigate option granting practices or the existence of a government investigation into their option grants.

Recently, the Wall Street Journal and several investment banking and research firms analyzed a number of companies’ stock option grants, and found multiple instances in which grant dates corresponded to a company’s lowest trading price. The suggestion has been made that these occurrences could not have been coincidental. As a result, the issue of option “backdating” has become front-page news.

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