Backdating of executive stock options
He said it was an error due to a misunderstanding of accounting rules. executives and directors have resigned or been fired after internal reviews of options backdating problems. The company hopes to put its stock options issues in the past, but regulators say they are continuing to probe RIM's options practices. "When a company does an internal review, that helps speed our process, but it's not a substitute for our process," one U. RIM also announced it has appointed two new independent directors and is searching for two others. Balsillie and co-CEO Mike Lazaridis will pay -million each to cover the company's costs of investigating the options problems.
The admission makes RIM the first major Canadian company to get caught up in an options backdating scandal that has swept through the United States, leading to charges against some executives and forcing billions of dollars in earnings to be restated. The special committee report said all option grants, except those to the co-CEOs, were made under Mr.
Extant studies show that stock returns are abnormally negative before executive option grants and abnormally positive afterward.
We find that this return pattern is much weaker since August 29, 2002, when the Securities and Exchange Commission requirement that option grants must be reported within two business days took effect.
Furthermore, in those cases in which grants are reported within one day of the grant date, the pattern has completely vanished, but it continues to exist for grants reported with longer lags, and its magnitude tends to increase with the reporting delay.
We interpret these findings as evidence that most of the abnormal return pattern around option grants is attributable to backdating of option grant dates.
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