Geoffrey A. Manne, Joshua Wright
Date Posted: May 2010
In this short essay we take on some of the common claims surrounding the law and economics of the backdating of options. Most of these claims are rooted in the basic argument that backdating options amounts to concealment of compensation. While we agree that backdating may have amounted to a technical rule violation in some cases, there is actually no concealment and, in fact, backdated options are fully disclosed when granted, and their value incorporated into stock price. We also challenge a few other myths surrounding the practice of backdating options.