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If there was an advantageous dip in the stock price, that date might have been used as the grant date.And without access to all the pertinent documentation, shareholders might be none the wiser.Prior to new reporting rules in 2002, companies had many months to report the granting of stock options.Some used this delay to watch the prices go up and down.It’s likely the deceptive nature of this practice and the subsequent cover-ups that make law enforcement uncomfortable.If a company’s executives are on the up-and-up, the deception (and maybe even fraud) wouldn’t occur.So why not just grant stock options that are “in the money” from the start and not play around with the grant dates?

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This exercise price is usually equal to the market price of the stock on the date the options are granted, meaning that the options are “at the money.” Obviously, the value of this benefit would be greater if the exercise price were lower.Also, whether or not options are “at the money” or “in the money” may change the tax deductibility of the options.Companies have gone wrong because they simply haven’t followed these steps.At the end of the day, though, the “why” doesn’t really matter. Executives and boards work for the shareholders, and they deserve full disclosure.The Heart of the Issue If stock option backdating can be done legally, why are companies getting in trouble for this practice?

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