Definition of option backdating
It was forced to restate earnings by recognizing a stock-based expense increase of $723 million between 19, after allegedly manipulating its stock options grants for the benefit of its senior executives.When company executives discovered that they had the ability to backdate stock option grants, thus making them both tax deductible and “in the money” on the date of actual issuance, the common practice of stock option backdating for financial gain began on a widespread level.The problem with this practice, according to the SEC, was that stock option backdating, while difficult to prove, could be considered a criminal act.21, 2014 /PRNewswire/ -- Shares in Ocwen Financial Corporation ("Ocwen" or the "Company") (NYSE: OCN) have plunged approximately 20%-its largest intraday drop since October 2008-after New York's Department of Financial Services accused the company of improperly option grants to periods of lower share prices (Yermack, 1997; Aboody and Kasznik, 2000; Chauvin and Shenoy, 2001; Lie, 2005; Heron and Lie, 2007; and Narayanan and Seyhun, 2006), or decreasing earnings to suppress share price when options are granted (Baker, Collins, and Reitenga, 2003; Cheng and Warfield, 2005; Bergstresser and Philippon, 2006; Cornett, Marcus, and Tehranian, 2008; Mc Anally, Srivastava, and Weaver, 2008).
Setting the date of an employee stock option to an earlier time than when the option was actually granted. Backdating the option is not illegal, but the improper disclosure of the activity to the Securities and Exchange Commission is considered illegal.
Giving retroactive value to purchases from the earlier date.