Reform and Restatement
One reform is that companies now need to expense their options on their income statement. As a result companies are allowed but not required to restate their earnings prior to this change in practices. Many companies, and especially technology ones, are electing to do just that. The Wall Street Journal is posting an “Options Scorecard†that is currently tracking 115 major companies with issues relating to past grants of stock options.
The Back Dating Scandal
It should be noted that there are some rather large scandals out there, involving a form of option manipulation called “back dating.†This is the practice of dating an option to a time earlier than when it is granted, when the exercise price would be lower. This is not illegal per se, but it can be if it wasn’t declared properly. It also raises many ethical questions that can hang over a company. Some very powerful executives have resigned over this type of practice. It would be profoundly unfair and incorrect to confuse the back dating scandals with what RIM has announced.
