As important as the issue of executive equity compensation is, it should not blind us to a more important concern.
For its part, the company must report failure to comply on its annual proxy statement.
District Attorney's Office has also issued several subpoenas in launching a criminal probe. The typical practice was to record a felicitously timed prior date as the grant date, such as the point when the stock had been at its lowest in recent months, instead of the date when the award was actually granted.
Nejat Seyhun of the University of Michigan for the newspaper showed that that options granting practices between 20 often failed to comply with the Sarbanes-Oxley requirement that grants of awards to executives be reported within two days of board approval (T"he Dating Game: Do Managers Designate Option Grant Dates to Increase Their Compensation? Prior research at Erik Lie at the University of Iowa found a pattern of probable options backdating in a number of companies prior to 2002.
More telling, only 0.9% of the scheduled grants showed a pattern of fortuitous timing, strong proof that the pattern in unscheduled grants could not be the result of random variation.
Some of the companies that get entangled in this may have been making honest mistakes, recording dates that were off by a few days because of inadequate administrative procedures.