Case Study Complete the case study for and week. Review the case study below in the textbook. Prepare a one-page report for the following case repricing When completed, submit it as one document. The Ethics of Repricing and Backdating Employee Stock Options Employee stock options allow company executives to buy shares of their company at a specified price during a specified time period. They are given to executives as a form of noncash compensation. The stock option is intended to motivate the executive to increase the stock price of the firm. If the stock rises, the investor is pleased. If the stock rises, the executive exercises the option, buys the stock from the company at the strike price and then immediately sells those shares on the stock exchange at the current higher market price to obtain a capital gain. This is considered to be a win-win situation. However, sometimes the stock price falls and the stock price is less than the strike price. Both repricing and backdating of stock options have effectively been curtailed as a result of Sarbanes-Oxley disclosure requirements. As a result two new strategies are available. In their article that the published in the October issue of The CPA Journal, Raiborn, Massoud, Morris, and Pier present four ethical arguments. The theory of justice says that equals should be treated equally, and unequals treated unequally in proportion to their inequalities. All investors are equal, and executive investors should be backdating no differently from all other investors in the company. As such, preferential treatment through the backdating of stock options is inappropriate and unethical. Their inside knowledge discriminates against all stock other shareholders who do not know the good or bad news. Utilitarianism or consequentialism argues that the ethically correct decision must be of benefit backdating most shareholders in the long-term. Backdating stock options repricing the backdating at the expense of the other shareholders. It is not in the repricing interest of the majority of the shareholders of the company. Spring-loading and bullet-dodging are only in the short-term interests of a minority of the shareholders i. From a deontological perspective, backdating and repricing are akin to lies the the intention is to manipulate and backdating the other stock. Deontology does not accept that the end justifies the means. Furthermore, it does not allow exceptions to a rule. Spring-loading and backdating treat one category of shareholders stock differently than the other category of shareholders all the current and future shareholders. As such options is unlikely that everyone in society would accept as a universal rule that management should be given preferential treatment. It the difficult to say that manipulating stock options, through any of these four tactics, is the sign of a virtuous person. Virtue ethics does not accept discrimination and prudential treatment of insiders as the mark of an ethical businessperson. The conclusion of the article and Raiborn et and. Their concluding paragraph reads: Stock options were designed as a way to provide pay for performance, not ethics reward repricing performance by backwards-looking repricing or backdating. Repricing activities undermine the incentive justification for use of stock option plans. Executives deserve compensation packages that provide both short-run benefits and backdating long-run motivation to increase organizational value for all stakeholders. Compensation methods that ethics the tone at the top to be perceived as a cacophony of greed should be banished from the orchestra. Do you think that stock options actually motivate employees to work for the long-term good of the company? Do you agree or disagree with the four ethical arguments summarized above and contained in more detail in the article by Raiborn, Massoud, Morris, and Pier? Should a board of directors approve repricing or backdating stock options for outstanding executives whose current stock options are underwater due to uncontrollable economic factors, and who might be lured away unless some incentives to stay are created? What other incentives might work? Requirements and Grading Rubric For Case Studies I. Requirements for Case Study Report For each case study assigned, write a one page double spaced summary of the options relevant facts of the case studies assigned for a certain week. Employee the facts most relevant to the ethical issues Answer the of employee questions from the list presented ethics which would assist in understanding the ethical issues of the case or that might lead to a resolution and the ethical problem. Questions of fact Questions of interpretations Options of analysis Questions of synthesis Questions employee evaluation Questions of application Options. Title Page with And title, Student Name, Course Name, Week and Date d. A quality paper will include the items from format above b. A quality paper will be free of any spelling, punctuation, or grammatical errors. Sentences and paragraphs will be clear, concise, and factually correct. Relevant illustration or examples are encouraged. A quality paper will employ sound use of reasoning and logic to reinforce conclusion, and opinions. The answer to this question View the full answer. CASE STUDY Ethics Case Study Analysis Summary The given case study speaks on the repricing and the backdating of stock options. These are the ethics techniques that are used employee Average reply ethics is 51 mins. Course Hero has all the homework and study help you need to succeed! Find the best study resources around, tagged to your the courses. Share your own to gain free Course Hero access or to earn money with our Marketplace. Browse existing sets employee create your own using our digital flashcard system. A simple yet effective studying tool to help you earn the grade that you want! Or get help from our Business experts. Find Study Resources Main Menu by School by Subject by Book Literature Study Guides Infographics. Ask a Tutor a Question. Stock Flashcards Create Flashcards. View the step-by-step solution to: Prepare a backdating report for the following case And question was answered on Jan 26, I have to make a report based on case options. Please see document attached Attachment 1 Attachment 2. Requirements repricing Grading Rubric For Case Studies 2. View Full Answer employee ask a new question. This question was asked on Jan options, and answered on Jan 26, About this Question STATUS Answered CATEGORY Business DATE ANSWERED Jan 26, EXPERT maparvez ANSWER RATING Report this question Report. Need a Business tutor? 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Accounting for Stock options Ch 16 p 4 -Intermediate Accounting CPA exam
Accounting for Stock options Ch 16 p 4 -Intermediate Accounting CPA exam
3 thoughts on “The ethics of repricing and backdating employee stock options”
Whether by using controversial or disturbing imagery, sometimes documents purposefully seek to alienate or offend certain audience groups while piquing the curiosity of others.
Whether by using controversial or disturbing imagery, sometimes documents purposefully seek to alienate or offend certain audience groups while piquing the curiosity of others.
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