Health backdating can beauty be intimidating
It would not be uncommon for there to be a lapse of days or even weeks between the time commercial terms are agreed and the date of final contract execution.
Even for a simple document such as a Non-Disclosure Agreement (or Confidentiality Agreement), the parties may legitimately want the document to take effect from an earlier date.
He pays the per share exercise price and can turn around and sell those shares on the exchange for each, netting a profit of per share, or ,000.
Why It Matters Granting stock options to employees is a generally accepted and perfectly legal form of compensating employees. Critics of backdating argue that the practice is difficult to detect and thus encourages boards and executives to use it to synthesize more creative compensation packages.
The commonwealth-trained (and more prudent) approach would be to insert the date only when the last party has signed and to use a date no earler than the date of that last signature.
This should cover the majority of cases that come across corporate counsel’s desk.
How It Works For example, let's assume that John Doe is the CEO of Company XYZ.
When he was hired, the Company XYZ board of directors offered John an attractive salary as well as an annual grant of 1,000 Company XYZ stock options.
On the day he decides to exercise his options, Company XYZ shares are trading at .
Typically, the grant date of the stock options is the same as the date of the board meeting.
This is important to note, because the grant date is what determines the exercise price on the options.
Under normal circumstances, he pays the per share exercise price and can turn around and sell those shares on the exchange for each, netting a profit of per share, or ,000 total.
But if John's options are backdated, then his exercise price is only per share.
In this article, the author writes: “Backdating by itself is not generally, at least with respect to private agreements, illegal.