Spotlight on Stock Options Backdating
The corporate stock option backdating scandal has dominated business page headlines This essay will present a number of observations on the option backdating Allegedly, the firm's general counsel, who participated in the scheme, called Triquint Semiconductor. TQNT. PMC-Sierra. PMCS. Skyworks Solutions. Options backdating is the granting of an option dated prior to the actual date when of stock options to the SEC within two months of the grant date. officer directed the company to engage in schemes to provide undisclosed. statements after the date of this Annual Report on Form K to conform these statements to actual results. safe and liquid and that provide a reasonable return may be impaired. assumptions, including the expected lives of stock options, the SCH XBRL Taxonomy Extension Schema Document.
Kauser was employed by Rogers Cantel, Inc. Kauser also serves on the board of Pendrell Corporation, an intellectual property solutions company. Kauser brings extensive experience in the wireless broadband and networks industry to the board and committees. Kauser received a B. Nelson became a director of TriQuint in August Fromhe has been the co-founder and principal of Tritech Sales and Services, LLC, a strategic product, business development and sales function consulting firm.
During his career, Mr. Nelson has worked closely with both national and international regulators and standards bodies on the creation of 3G specifications and standards.
Nelson also serves on the board of Aegis Mobility, Inc. Nelson received a Bachelor of Science degree in Electrical Engineering from the University of Minnesota and is the inventor of numerous patents covering broad and fundamental aspects of wireless communications.
Nelson brings his extensive wireless and 3G experience to the board and committees.
Quinsey joined our company in July as president and chief executive officer and as a director. From September to JanuaryMr. Quinsey was vice president and general manager of the Analog Division of ON Semiconductor, a manufacturer of semiconductors for a wide array of applications.
From to SeptemberMr. Quinsey received a B. As the chief executive officer of our company, Mr. Quinsey brings his knowledge and breadth of experience within the company to the board. Rhines has been the chief executive officer of Mentor Graphics Corporation, an electronic design automation company, since and chairman of its board of directors since Prior to joining Mentor Graphics, he spent 21 years at Texas Instruments Incorporated "Texas Instruments"a semiconductor manufacturer, with his most recent position having responsibility for directing its worldwide semiconductor business as the executive vice president of Texas Instruments' Semiconductor Group.
TRIQUINT SEMICONDUCTOR INC - FORM K/A - April 10,
Rhines also served as a director of Cirrus Logic, Inc. Rhines holds a B. Rhines brings his substantial experience as an executive with high technology companies to the board and its committees.
Sharp joined our company in September as director, president and chief executive officer. In JulyMr.
Sharp stepped down as president and chief executive officer of TriQuint, and in Septemberhe resigned as an employee of TriQuint. Sharp had served various roles associated with semiconductor industry related companies. Many companies' stock option plans provide that stock options must be granted at an exercise price no lower than fair market value on the date of the option grant.
Thus, backdating can be misleading to shareholders in the sense that it results in option grants that are more favorable than the shareholders approved in adopting the stock option plan. The other major way that backdating can be misleading to investors relates to the method by which the company accounts for the options. Until very recently, a company that granted stock options to executives at fair market value did not have to recognize the cost of the options as a compensation expense.
Spotlight on Stock Options Backdating
However, if the company granted options with an exercise price below fair market value, there would be a compensation expense that had to be recognized under applicable accounting rules. If a company backdated its stock options, but failed to recognize a compensation expense, then the company's accounting may not be correct, and its quarterly and annual financial reports to investors may be misleading. Although many companies have been identified as having problems with backdating, the severity of the problem, and the consequences, fall along a broad spectrum.
At one extreme, where it is clear that top management was guilty of conscious wrongdoing in backdating, attempted to conceal the backdating by falsifying documents, and where the backdating resulted in a substantial overstatement of the company's profitability, SEC enforcement actions and even criminal charges have resulted. Toward the other extreme, where the backdating was a result of overly informal internal procedures or even just delays in finalizing the paperwork documenting options grants, not intentional wrongdoing, there is likely to be no formal sanction—although the company may have to restate its financial statements to bring its accounting into compliance with applicable accounting rules.
With respect to the more serious cases of backdating, it is likely that most of the criminal actions that the government intended to bring were brought in There is a five-year statute of limitations for securities fraud, and under the Sarbanes-Oxley Act ofoption grants to senior management must be reported within two days of the grant date. This all but eliminated the opportunity for senior management to engage any meaningful options backdating.
Therefore, any criminal prosecution is likely to be based on option grants made before Sarbanes-Oxley took effect, and the deadline facing the government for bringing those prosecutions has already passed.
As of 17 Novemberbackdating has been identified at more than companies, and led to the firing or resignation of more than 50 top executives and directors of those companies. Notable companies embroiled in the scandal include Broadcom Corp. Some of the more prominent corporate figures involved in the controversy currently are Steve Jobs and Michael Dell.
Anderson and former Apple general counsel Nancy R. Heinen for their alleged roles in backdating Apple options.