I don't know SEC requirements but if backdating were legal, Apple and a slew of dozens of others wouldn't be fessing up to questionable options pricing dates. Frankly, I deem backdating illegal since as a shareholder I can't backdate my buys or sells so why should insiders be allowed to pilfer the shareholders? Companies should price options the day they're granted and not "let's take the low point several weeks or months ago when the stock go hammered". How many insiders made out like bandits when the stock dropped to $14 in 2002-3? How many insiders were there buying shares at those points in time?
Backdating can be legally practiced by virtually any company provided the practice is disclosed. The issue is not of the practice but of it's disclosure. For example, if Apple had spelled out in its financial statements "executive options will be granted at the end of each fiscal quarter with a strike price equal to the lowest closing price of the stock during the quarter", this would all be a non-issue as they would have also likely paid the appropriate taxes etc. Virtually all employee stock purchase plans I've heard of work on a variation of this type of plan.
The question is one of disclosure and what constitutes adequate disclosure. After all, everyone knew jobs had options on 27.5 million shares and was given a jet worth tens of millions of dollars... if you don't like it, feel free to sell the stock or not invest in the first place. Further, as I recall the announcement of Jobs becoming CEO was within a week of the options grant for example.
Based on what I've seen to date, I think Apple was probably in technical violation to some degree and that the company and/or its execs will have to do a mea culpa and pay some taxes, penalties, and fines. If that's the case there's nothing to see here, please move along ;-) |
