Backdating stock scandal
However, under the new FAS 123R, the expense is based on the fair market value on the grant date, such that even at-the-money options have to be expensed.) Because backdating is typically not reflected properly in earnings, some companies that have recently admitted to backdating of options have restated earnings for past years. The exercise price affects the basis that is used for estimating both the company's compensation expense for tax purposes and any capital gain for the option recipient.
Thus, an artificially low exercise price might alter the tax payments for both the company and the option recipient.
We look forward to your contributions to Adobe’s ongoing success.” On Friday, after just six months on the job, Adobe Systems announced the resignation of CFO Randy Furr.
Unfortunately, these conditions are rarely met, making backdating of grants illegal in most cases.