Ethics of options repricing and backdating Free filipino chatting sites without registration
Many companies that have traditionally relied on stock options to attract, retain and incentivize employees are now finding themselves wondering how to deal with “underwater” stock options (i.e., stock options whose exercise price exceeds the fair market value of the underlying stock).
Many such companies are considering “repricing” their stock options as a way to make their stock options more valuable to employees.
Under this approach, a company cancels the underwater stock options and replaces them with an outright restricted stock award.
Backdating of stock options is an example of an agency problem.One approach is referred to as the “six month and one day exchange”.Under the FASB rules, the cancellation of an existing option and the grant of a new option is essentially not a “repricing,” and therefore avoids variable accounting treatment if the cancellation and repricing are more than six months apart.Additionally, when considering a make up grant, a company should consider the potential unwarranted dilution to existing shareholders.Conclusion Repricing of stock options should not be lightly undertaken.