Apple option backdating scandal


The total compensation to executives granted back-dated options was either unchanged or, perhaps, lower than it would have been, since people tend to irrationally over-value a bird in hand (in the money options) to a dozen in the bush (out of the money options).

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The basic idea was that many companies seemed to award stock options on days when their stocks were at low-points, which increased the value of the options when the stock increased and made the stock cheaper to buy for the executives.If you're not in the class, but know people or institutions who might be, spread the word.*For those of you scratching your head at the phrase "cy pres" here's a quick explantion.It dominated the business press in 20, right when the financial world was crumbling.It distracted not only the media and the public, but the regulators and courts as well.The reason for doing this was simple: stock options priced at or above where the stock is trading (aka, "out of the money" options) get favorable tax treatment compared to stock awards priced below the market price (aka, "in the money" options).

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