The ethics of repricing and backdating employee stock options Russiaporno


02-Jan-2020 02:02

the ethics of repricing and backdating employee stock options-63

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It is not in the best interest of the majority of the shareholders of the company.Spring-loading and bullet-dodging are only in the short-term interests of a minority of the shareholders (i.e., executive shareholders) and not in the best long-term interests of all the other (majority) shareholders.Employee stock options allow company executives to buy shares of their company at a specified price during a specified time period.They are given to executives as a form of noncash compensation.The option or “strike price” is normally equal to the market price of the stock on the day that the option is granted to the employee.The stock option is intended to motivate the executive to increase the stock price of the firm. If the stock rises, the executive exercises the option, buys the stock from the company at the strike price and then immediately sells those shares on the stock exchange at the current (higher) market price to obtain a capital gain. Both the investor and the employee gain from the increase in the market price of the company’s stock.Compensation methods that cause the tone at the top to be perceived as a cacophony of greed should be banished from the orchestra.Questions Do you agree or disagree with the four ethical arguments summarized above and contained in more detail in the article by Raiborn, Massoud, Morris, and Pier?

the ethics of repricing and backdating employee stock options-63

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The theory of justice says that equals should be treated equally, and unequals treated unequally in proportion to their inequalities.

Utilitarianism or consequentialism argues that the ethically correct decision must be of benefit to most shareholders in the long term.

Backdating stock options benefits the executive at the expense of the other shareholders.

From December 1996 to July 2006, Jim Balsillie, Dennis Kavelman (then CFO), Mike Lazaridis and certain other RIM officers and directors engaged in improper stock option granting practices, including backdating and repricing of executive, director and employee stock option awards. In the February 2009 settlement of the Ontario Securities Commission’s enforcement action, Balsillie, Lazaridis and Kavelman agreed that they engaged in option backdating and repricing and that the total “in-the-money” undisclosed benefit from the incorrect option dating practices was approximately million.

Following an internal investigation, in May 2007, RIM restated its historical financial statements with a cumulative, non-cash, stock-based compensation expense of U. They confirmed that they returned the improper financial benefits they received from the incorrectly priced options and undertook to contribute, in aggregate, .1 million to RIM and to pay administrative penalties and OSC costs totalling million.

Furthermore, it does not allow exceptions to a rule.