The Amendments are being published for public consultation for a thirty (30) day period.The Amendments will only become effective following public notice and comment.For instance, if the board meeting is on January 3, 2012, and Company XYZ stock closes at per share that day, then the exercise price of John's 2012 stock are backdated, then his exercise price is only per share.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.
When news broke, earlier this year, that some companies had backdated stock-option grants ...These requirements were effected through an amendment to Section 611 of the TSX Company Manual (the "Manual"), an extract of which is attached as Appendix A.In addition to the requirements under Section 611 of the Manual, TSX requires specific, prescribed disclosure whenever security holder approval is required in connection with transactions involving the issuance of securities such as private placements and acquisitions.They played games with their accounting because they thought investors weren’t smart enough to look at the fundamentals.They were “managing earnings,” massaging the numbers, something that many (perhaps most) companies do in some form or other...In the case of backdating, the only crime was the coverup. In-the-money options—but not at-the-money options—had to be recorded as an expense, which drove down reported earnings.Backdating allowed companies to reward employees with in-the-money options while getting the favorable accounting treatment of at-the-money options. Classifying the options properly would have lowered the number in the “earnings” box, and so C. O.s assumed that it would also drag down the company’s stock price.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.The companies involved in the recent scandal were backdating options to a time when the stock price was lower, making them immediately lucrative. stock options by claiming that they’re an incentive for performance: the executives get rich only if they do a good job and the stock goes up.As it happens, companies are perfectly free to issue options priced below the current market: those are called “in the money” options, and they’re worth something right when they’re issued. But there’s a rule that companies have to follow when they issue “in the money” options: they have to disclose it in their financial statements. Unless executives can time-travel, though, it’s hard to make that case for backdated options.