Plaintiffs’ lawyers have seized upon this issue as yet another opportunity to bring cases against corporations and their officers and directors.
The backdating problem was first highlighted by Professor Erik Lie of the University of Iowa, who published his initial study in 2004.
Professor Lie concluded that the robust profitability of so many options was statistically impossible absent some artificial influence such as backdating.
With its attendant investigation, legal actions and executive fallout, the practice of options backdating is expected to have a short shelf life.
But while options backdating may have a truncated life expectancy, its current impact is robust.
Class actions ostensibly are brought on behalf of the shareholders of the company who have been impacted by the option grants.