Backdating Stock Options: A Primer in Social Irresponsibility

Abstract

Backdating stock options refers to the falsification of stock issuance documentation by corporate officials in order to receive a favorable stock price. A lower stock price provides assurance of a greater payoff once the option is exercised and sold. This paper argues that backdating stock options is representative of the intrinsic nature of those controlling the corporate form. Stock options are granted as an incentive of corporate ownership; however, corporate officials have circumvented this intent through the use of the backdating mechanism. Using a Veblenian analysis, it is presumed that backdating stock options represents another common practice of pecuniary coercion by those controlling “Captains of Industry and Finance” who have separated themselves from the instincts of ownership and workmanship. Current commentary focuses on the need to reinvigorate the social and political spheres with a desire to adapt to the ways of the business sphere.