What is backdating stock options

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An example illustrates the potential benefit of backdating to the recipient.

The Wall Street Journal (see discussion of article below) pointed out a CEO option grant dated October 1998.

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Options backdating is the practice of altering the date a stock option was granted, to a usually earlier (but sometimes later) date at which the underlying stock price was lower.This article will attempt to provide reasons why this issue is important, why civil and criminal authorities are investigating, and why it is critical that public companies who issued options over the past...The Dating Game, by James Surowiechi, The New Yorker: ..That means the company incurs an expense equal to the difference in the share price between the two dates.ESOs are usually granted at-the-money, i.e., the exercise price of the options is set to equal the market price of the underlying stock on the grant date.

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