Ethics of options pricing and backdating

If a large portion of an executive's compensation is in the form of stock options, there is a greater incentive to increase share price through value-adding activities.A raise in stock price increases both the value of the stock options as well as shareholder returns.Lacking the on-hand capital to pay large salaries to executives, stock options were offered instead.This method of compensation was incredibly attractive in the tech industry as booming growth dramatically raised stock prices, equating to huge gains for executives who exercised their options at the peak of industry performance.The ethics of backdating are examined using a contract-based ethical framework, and the breakdown of ethics by the overwhelming number of participants is examined using moral disengagement.Through this analysis, the backdating of options is shown to be unethical, leading to the question of what should be done about it.As a manager of any firm, the most important goal is to maximize returns to shareholders through growth and profit producing activities.Stock option grants are meant to align the incentives of executives with those of the shareholders.

Following an internal investigation, in May 2007, RIM restated its historical financial statements with a cumulative, non-cash, stock-based compensation expense of U.This form of performance-based compensation became increasingly favoured over conventional salary compensation during the 1990's.One reason was the boom of the technology industry, which used stock options to lure talented managers to their start-up firms.With comprehensive coverage of government documents and more than 2,400 journals from inception on hundreds of subjects such as political science, criminal justice, and human rights, Hein Online is an affordable option for colleges and universities.Documents have the authority of print combined with the accessibility of a user-friendly and powerful database.

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