Fremont compensation backdating
Let's say Jane now decides to exercise her stock options.
On June 7, 2007, the company said the SEC issued a formal probe order related to its stock-options grants.Typically, the grant date of the stock options is the same as the date of the board meeting.This is important because the grant date is what determines the exercise price on the options.The board formally grants the stock options to John every year at its January board meeting.This is important to note, because the grant date is what determines the exercise price on the options.She 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 total.
Granting stock options to employees is a generally accepted and perfectly legal form of compensating employees, and typically companies grant stock options with an exercise price that is equal to the market price of the shares on the date of the grant.
Here's a look at companies that have come under scrutiny for past stock-option grants and practices.
THIS SCORECARD WAS LAST UPDATED IN SEPTEMBER 2007 AND IS NO LONGER BEING UPDATED. Note: This list contains companies that have disclosed government probes, misdated options, restatements and/or executive departures as of Septmeber 2007.
For instance, if the board meeting is on January 3, 2020, and Company XYZ stock closes at $45 per share that day, then the exercise price of Jane's 2020 stock option grant is $45 per share.
That is, she has the right, but not the obligation, to purchase 1,000 shares of Company XYZ stock for $45 per share.
Under normal circumstances, she pays the $45 per share exercise price and can turn around and sell those shares on the exchange for $50 each, netting a profit of $5 per share, or $5,000 total.