Options backdating a canadian perspective Sluts fre fone trail
In anticipation of this possibility, there is certain information that all company directors should now be aware of.
At its root, backdating allows for the use of hindsight when determining the grant date for stock options and therefore the price.
S., the Canadian Securities Administrators (CSA) released a staff notice, which provides directors with certain guidelines intended to reduce the risk of non-compliance with securities legislation.
These guidelines include, among other points, (i) the establishment of a compensation committee; and (ii) the adopting of policies regarding corporate disclosure, insiders and "black-out" periods around earning announcements.
The notice concludes with a warning that enforcement action may be taken if the CSA is made aware of any non-compliance with securities legislation.
Nearly 40 directors and officers have resigned as a result of these investigations.
The situation is similar for Comverse's former general counsel as well as former CEO, Jacob Alexander.
With Canadian corporate culture generally considered akin to that of the United States, the question of whether or not options backdating will reach scandalous proportions North of the border inevitably presents itself.
Originally conceived as a tremendous tool allowing companies to attract talent and reward employees without affecting cash flow, stock options also serve to align the interests of company executives with those of shareholders.
The granting of an "in the money" option clearly negates such an alignment.
In this case, the result is not only a more favourable exercise price but the likely contravention of Canadian securities legislation as well.