Stock option backdating wall street journal

The Journal also publishes the luxury news and lifestyle magazine WSJ..The first products of Dow Jones & Company, the publisher of the Journal, were brief news bulletins, nick-named "flimsies," hand-delivered throughout the day to traders at the stock exchange in the early 1880s. All stemming from the practice known as “options backdating.” Options backdating occurs when a company issues stock options on one date, but reports in its financials an earlier issue date to create a “strike” or exercise price equal to the earlier date’s lower price.Another consequence is that the company underrepresents the real nature of an executive’s compensation, perpetuating the myth that options are performance-based incentive compensation.That exercise price, or strike price, usually takes one of three forms: the closing price on the day of the grant; an average of the highs and lows of the day; or the closing price from the previous day.The lower the strike price, the greater the potential for making money when exercising the options.The backdating problem was first highlighted by Professor Erik Lie of the University of Iowa, who published his initial study in 2004.

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Researchers reviewed the 141 companies listed as having come under scrutiny for their stock-option practices in the Wall Street Journal Options Scorecard website to understand why corporations respond to the same kind of misconduct in different ways.

“When faced with scandal, it’s critical for corporations to manage their images and maintain legitimacy with stakeholders and the general public,” says Anthea Zhang, professor of strategic management at Rice.

The newspaper is published in the broadsheet format and online.

The Wall Street Journal is the largest newspaper in the United States by circulation.