Although most of the big bosses of U.S. corporations are already doing very well financially, some are doing even better than the rest. More than 30 CEOs for this latter group of companies have fully vested stock options worth $100 million or more. That’s in addition to their regular pay checks. Until 2004, companies didn’t have to treat options as an expense, so they could parcel them out on executives without hurting corporate earnings per share. It is said that some companies didn’t even realize how huge the pot would grow if they kept doling out options. Nevertheless, that’s exactly what’s happened. The stock options are just a form of additional compensation for corporate bosses who are already being paid very handsomely by their companies.
As you know, stock options give recipients the right to buy shares in the future at the current price, known as the “strike” or “exercise” price. The higher the stock rises, the richer executives can become. Generally, the strike price is set as the closing price on the day options are granted. But many firms, particularly during the dot-com boom, consistently granted options when the stock hit a monthly or yearly low, suggesting they chose the grant date with the benefit of hindsight. Backdating itself isn’t illegal, but failing companies that don’t disclose it properly risk the wrath of the Securities and Exchange Commission and the Department of Justice.
Source: Associated Press
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