Numerous financial analysts replicated and expanded upon the prior academic research, developing lists of companies whose stock price performance immediately after options grants to senior management (the purported dates of which can be ascertained by inspecting a company's Form 4 filings, generally available online at the SEC's website) was suspicious.For instance, public companies generally grant stock options in accordance with a formal stock option plan approved by shareholders at an annual meeting.In 1972, a new revision (APB 25) in accounting rules resulted in the ability of any company to avoid having to report executive incomes as an expense to their shareholders if the income resulted from an issuance of “at the money” stock options.
Cases of backdating employee stock options have drawn public and media attention.
Academic researchers had long been aware of the pattern, exhibited by some companies, of share prices rising dramatically in the days following grants of stock options to senior management.
However, in late 2005 and early 2006, the issue of stock options backdating gained a wider audience.
One of the larger backdating scandals occurred at Brocade Communications, a data storage company.
It was forced to restate earnings by recognizing a stock-based expense increase of 3 million between 19, after allegedly manipulating its stock options grants for the benefit of its senior executives.