Apple corporation stock option back dating scandal, spotlight on Stock Options Backdating
Some have speculated that Apple could unveil its phone at the Macworld Expo, an event held every January that Apple has often used to showcase new products. The stock subsequently fell and the options were underwater, even though they had been backdated.
The board of directors benefited from the backdated options by being able to reward Jobs and other top executives who were valuable to the company. It is rare for someone to commit unethical behavior without the expectation of gaining some sort of benefit. Options backdating consists of granting an option that is dated prior to the date the option is actually granted. The pressure to conform to a group is very real, as Solomon Asch showed in his experiments. Both Heinen and Anderson personally received millions of dollars in unreported compensation as a result of the backdating.
It allows the grantee to receive options that are already in the money, which allows him or her to glean a much higher profit. The media attention that options backdating has received has also played a roll in discouraging future backdating.
Backdating Scandal Returns to the Forefront. This reward could be accompanied or replaced by clemency if the whistle-blower was involved in the scandal. Because of how widespread the behavior was, it never presented a realistic possibility that Jobs would lose his, err, job as part of the scandal. The possibility of corporate fraud, such as options backdating, is a very real threat even after the many scandals that have been uncovered.
Spotlight on Stock Options Backdating
Performance-based compensation, on the other hand, was deductible. Read on to find out how the scandal emerged, what brought it to and end and what you can learn from it now. Heinen, Jobs also claimed that recognition by his peers was what drove him to ask for the options. Sarbanes Oxley has made options backdating more difficult by shortening the time frame firms have to report options grants.
Group conformity, conformity to authority, and poor judgment of consequences all pressure individuals, such as Jobs, Heinen, and Anderson, to act unethically. The Commission is seeking injunctive relief, disgorgement, and money penalties against Heinen, in addition to an order barring her from serving as an officer or director of a public company. The amount of people who knew about backdating and did nothing to stop it is evidence of group conformity. They were deceived when Apple appeared to be more profitable than they actually were. Jobs, a notoriously difficult and abrasive chief executive.
Delivered twice a week, straight to your inbox. Since he or she had already successfully backdated options, it gave that person and the idea more credibility. As more directors and executives appeared to favor the idea at Apple, it became more difficult for any one person to oppose options backdating.
Part of the reason that the board may have failed to live up to their responsibilities to the investors was the close ties they had with Jobs. Backdating is legal so long as it is disclosed correctly. In addition to the pressures already mentioned, the subordinate was also subject to conformity to authority. The Dangers of Options Backdating.
Apple Owns Up to Backdating. Apple Executives Settle Backdating Suit. The news, centered on the dubious awarding of stock options to Steve Jobs, afrointroductions dating site login prompts Apple share prices to fall. Apple and companies like it can prevent future unethical behavior by increasing consequences and rewarding the ethical behavior of whistle-blowers.
By faking the issue date, they could guarantee themselves in-the-money options and instant profits. These people were most likely insulated at some level from any initiatives they did not create themselves and from typical ethics training courses. These three men had an interest in keeping favor with Jobs since he helped them to get on the board and since they had friendly personal relationships. So many firms were involved with backdating that it was very easy for Apple to conform to the common business practice, despite the fact that it was unethical and fraudulent.
Instead, they failed in their duties as gatekeepers and caused Apple to conceal millions of dollars in stock option expenses. The Bottom Line Betting on stock prices when you already know the answer is dishonest. This was one of many options backdating scandals to occur within the last decade.
Jobs and the other executives felt that they deserved a reward for their contributions to the company. Some firms have attempted to teach ethical behavior and instill an ethical corporate culture within their firms. Adding to the pressure to conform was an uncertainty about the consequences of options backdating. Jobs and Heinen never admitted to any wrongdoing. Nevertheless, the executives and directors should have realized the considerable consequences should the fraudulent backdating ever be discovered.
Apple's Options Backdating Scandal
Since directors often serve on more than one board, they form a tight-knit community of interlocking boards. However, such measures will not prevent further commissions of other types of corporate fraud, except to the extent to which they increase the perceived or actual consequences to fraud. This subordinate was ultimately responsible to Heinen, who reported to Jobs and Anderson. Many of the options that Jobs and other executives had been granted were worthless due to the collapse of the tech bubble. From a shareholder's perspective, nobody likes to be lied to when providing the financing and paying the salaries.
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