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Backdating epidemic.

AT LEAST 257 PUBLIC COMPANIES have option backdating problems.

That's according to a report released in March by Glass Lewis, a Denver-based shareholder services firm.

The report found that to date, the options backdating scandal has resulted in an unadjusted initial decline in market value of $5.5 billion and the recognition of at least $12.3 billion in additional pre-tax compensation expenses.

At least 85 executives and directors at 46 companies have been fired, demoted or resigned in connection with backdating, the report found.

The report also found that the scandal has resulted in 252 internal investigations, 128 Securities and Exchange Commission inquiries, 58 Department of Justice investigations, 129 shareholder lawsuits and six criminal cases.

A company gives executives or employees options to purchase the company's stock sometime in the future, at today's prices. This is intended to give them an incentive to work to raise the company's stock price.

Options can be a very valuable form of compensation if they enable the recipient to purchase stock at a price below the market value at the time they are exercised.

In the backdating scandal, executives at many firms have been found to have received options made to look like they were allocated earlier--through backdating. In this scenario, the executive automatically receives a great deal, because the option is tied by design to a price lower than the current stock price.

A big chunk of the cases are in the computer industry, including 43 in software and programming and 37 in semiconductors.
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Title Annotation:NAMES IN THE NEWS
Author:Mokhiber, Russell
Publication:Multinational Monitor
Article Type:Brief article
Geographic Code:1USA
Date:Mar 1, 2007
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