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May 22, 2006
Homework Reading on Option Backdating
For those of you, like me, interested in the mechanics of how so many companies are being caught backdating executive stock options, Eric Lie's work is the canonical reading. Check this site, this published paper, and this forthcoming paper.Here's an instructive figure from Elie's work:
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Looks like the easy way around this is to award $0 cost opions like IBM appears to do.