Awarding employees with stock options those are dated prior to the actual grant date.The date chosen could be one when the company’s stock was at a low, so the options can be in-the-money at the time of granting itself.He pays the $15 per share exercise price and can turn around and sell those shares on the exchange for $50 each, netting a profit of $35 per share, or $35,000.Granting stock options to employees is a generally accepted and perfectly legal form of compensating employees. Critics of backdating argue that the practice is difficult to detect and thus encourages boards and executives to use it to synthesize more creative compensation packages.In our example, backdating the options is the same as giving John Doe a check for $35,000 -- without recording that $35,000 on the income statement as compensation.That, in turn, understates the company's expenses and overstates its profits, which is a violation of generally accepted accounting principles and has been the grounds for a variety of fraud and miscellaneous charges from federal, state and local regulators.These example sentences are selected automatically from various online news sources to reflect current usage of the word 'backdate.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. In the finance world, backdating usually refers to the practice of changing the dates of option grants to one that is earlier than the actual grant date in order to place a lower exercise price on the options and thus enhance the potential profits from the exercise of those stock options.
This would mean that John's 2012 stock option grant would have an exercise price of $15 per share instead of $45 per share.For example, if one signs a contract on February 1, one may backdate it to January 31.Backdating is usually illegal; for example, one may use backdating to evade taxes.Milberg, Barroway Topaz and Bernstein Litowitz Jointly Announce $62 Million Settlement in Comverse Technology Stock Option Backdating Derivative Case; $60 million to be paid by former Comverse CEO Kobi Alexander; former general counsel and CFO also contributing, along with auditor Deloitte; additional corporate governance reforms undertaken scandal that not only forced Mc Guire to step down as United Health's CEO, but also served as one of the pivotal cases that thrust backdating into the spotlight as the biggest corporate accounting fiasco since the chicanery of Enron, et al.