Does backdating explain
What I am saying is that I’m not convinced that the fraud explanation can explain what we see in the data (which firms involved, the timing, etc.).Another commonly referenced explanation of backdating is naivety, i.e.But it is not obvious that the American system of executive pay â€” taken as a whole â€” is excessive or broken.The critics contend that chief executives cheat public shareholders.It is remarkable, but not incredibly surprising, how little attention has been paid to these questions in favor of the Gretchen Morgenstern-style rants that Professor Ribstein enjoys dismantling weekly.
As to “why backdating,” there seems to be little interest in figuring out what economic and institutional conditions led to the widespread adoption of option backdating and whether the practice is an efficient element of a compensation contract or something more sinister.
Have compensation committees become increasingly naive about option values since the 1990s?
It is difficult for me to believe that hundreds of companies do not understand that options are not “free.” I do not find this explanation persuasive.
Holman Jenkins reports that a group of economists led by Milton Friedman and Harry Markowitz are getting behind the idea of putting an end to the expensing of options. Jenkins goes on to discuss options backdating and makes the following points, which will sound unfamiliar to TOTM readers: Geoff made exactly these points in this space months ago (and also more recently, here).
Personally, I am thrilled to see a column that focuses on the real questions surrounding backdating: (1) Why do firms backdate? and (3) What is the theory of harm, if any, upon which we are going to base civil and criminal prosecutions?
is there a reason to believe that backdating became a comparatively attractive form of fraud in the 1990s relative to other methods of accomplishing the same task?