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01-Nov-2019 23:58

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Such practices are frowned upon by the Securities and Exchange Commission.Apple's practice of backdating stock options began in 1997 and continued into January 2002.That resulted in Apple missing the deadlines for filing the proper information with the Securities and Exchange Commission and its auditors. Ultimately, it seems Jobs swapped these options for restricted stock of lesser value.Today is a significant date in Apple history, though, because it was one of the big scandals that rocked Apple during its big climb back to the top in the mid-2000s."Unintended Consequences: Information Releases and CEO Stock Option Grants," forthcoming in the Academy of Management Journal by Tim Hubbard, assistant professor of management in Notre Dame's Mendoza College of Business, finds that the stock prices are significantly lower than expected during these periods, leading to major gains for CEOs—between 3,500 and 9,000, depending on the assumptions. The researchers collected all news releases from each firm during the period and used this data to understand whether firms release more negative news releases in this time frame and the type of negative news.How to compensate CEOs in a way that encourages them to act in the best interest of their firms has been the topic of much research and regulation. For example, the options backdating scandal, with cases first emerging in 2006, ensnared dozens of executives over allegations that the dates of stock-option awards had been manipulated to enrich recipients.

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During his March 18, 2008, deposition, taken at Apple’s Cupertino HQ, Jobs said, “It wasn’t so much about the money.” Instead, he said it was more about being “recognized by his peers.” He said he “felt like there is nobody looking out for me, you know.” But it didn’t necessarily appear that way to onlookers.

Both Dell and Novell have also recently received delisting notices from NASDAQ after failing to file quarterly 10-Q reports with the SEC.

Those filings, like Apple's, were delayed by investigations into backdating.

One of those two may be former CFO Fred Anderson, who served from 1996 to 2004, and whose resignation from Apple's Board of Directors was announced today.

Jobs issued an apology to Apple shareholders and employees, saying that the problems "which happend on my watch" are "completely out of character for Apple." He added that the company "will now work to resolve the remaining issues as quickly as possible and to put the proper remedial measures in place to ensure that this never happens again." Apple is not the only company to be busted for backdating stock options.

All three companies will be forced to restate earnings for the periods in question, which can be a laborious and time-consuming process.