Tax consequences of backdating options
With respect to both, there are pending parallel criminal actions as well.
In the late 1990s, companies were facing intense competition to hire and retain the best and brightest employees.Our Office of Economic Analysis then analyzed data and refined the areas of concern.And in the Enforcement Division, we gathered information and data regarding specific cases to bring the issues into focus, culminating in our enforcement actions over the last several years. I am old enough to remember employee stock options as an anti-takeover device.At the same time, there was sharp rise in the overall level of executive compensation (some would say astronomical), despite the million-dollar salary deductibility cap.In this environment, cash-strapped companies found stock options an attractive way to provide competitive compensation without further tapping their limited cash flows.
For example, at the money options received more favorable accounting treatment they did not need to be expensed.