Backdating wall street

Still, given that (a) backdating helps make earnings look better than they are; and (b) Jobs is a huge shareholder of Apple (10.12 million shares, as of last April), how could he not benefit from this behavior? Jobs recommended some backdating dates for other employees.

But the reporters also seem to misunderstand the process of how stock options are awarded.

The number of shares subject to option was 250,000 and the exercise price was (the trough in the stock price graph below.) Given a year-end price of , the intrinsic value of the options at the end of the year was (-) x 250,000 = ,750,000.

In comparison, had the options been granted at the year-end price when the decision to grant to options actually might have been made, the year-end intrinsic value would have been zero.

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).

But it all became worse than a pseudo-scandal, in fact.

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“The five most dangerous words in business may be ‘Everybody else is doing it,’” he wrote.

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