Apple corporation stock option backdating
The reason for doing this was simple: stock options priced at or above where the stock is trading (aka, "out of the money" options) get favorable tax treatment compared to stock awards priced below the market price (aka, "in the money" options).It was a tax advantaged way for companies to pay executives. Shareholders were correctly told the number of options granted and the price of the options.Had planned to grant stock options for its CEO on May 7, 2007.
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*For those of you scratching your head at the phrase "cy pres" here's a quick explantion.
The Scandal, the Misconception & the Legal How Misconduct Spreads: Undo Answer Wiki 2 Answers Bart Greenberg , Lawyer for Start-Ups and Growth Companies; Past Chair Tech Coast Venture Network Answered 375w ago · Author has 416 answers and 618.9k answer views Without addressing the backdating issue, I think there are a number of other issues that should first be addressed: First, under Section 409A of the Internal Revenue Code, to the extent that the option did not satisfy all of the requirements of Section 409A on the date of grant, regardless of whether the option is an NSO or an ISO, the optionee would be deemed to have "deferred compensation" in the amount of $1.80 per share, that is, the amount by which the then fair market value ($2.00 per share) exceeded the exercise price ($0.20 per share), which deferred compensation would not only be immediately taxable on the date of grant, but subject to an additional 20% federal tax, an additional 20% tax if in CA (or a state that has adopted the same), plus penalties and interest.
In order to comply with Section 409A, for example, the option could only be exercisable by the optionee upon termination of employment or upon a change of control (as specifically defined under Section 409A).
(The practice seems to have been particularly popular in the tech sector.) In 2007, New York City's municipal employee pension fund sued Apple over the backdated options.
A federal judge dismissed the case but class-action lawyers working for the pension fund kept the litigation going.
(Over the next year, this perception that Apple was no longer a scrappy underdog fighting the establishment would again be challenged when Apple sought legal action against apple backdating stock options bloggers for reporting on the company’s trade secrets.) In the end, the SEC announced in April 2007 that it would not pursue a case against Apple — in part because the company had set home based typing work job up an internal investigation into the stock scandal so rapidly.
Auditors' Role in the Diffusion of Stock stock options backdating scandal [1 record] TERMIUM Plus A primer for companies hit by the stock options scandal Oct.
It dominated the business press in 20, right when the financial world was crumbling.
It distracted not only the media and the public, but the regulators and courts as well.
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