It was the pseudo-scandal launched by the Wall Street Journal's investigative unit, after its reporters began following up on an academic report that demonstrated many executive stock options awards were too well-timed to be plausible.
The basic idea was that many companies seemed to award stock options on days when their stocks were at low-points, which increased the value of the options when the stock increased and made the stock cheaper to buy for the executives.
The reason for doing this was simple: stock options priced at or above where the stock is trading (aka, "out of the money" options) get favorable tax treatment compared to stock awards priced below the market price (aka, "in the money" options).
It was a tax advantaged way for companies to pay executives. Shareholders were correctly told the number of options granted and the price of the options.
No one's pay was "inflated" by backdating, unless you assume that the alternative would have been awarding executives exactly the same number of options at less-advantageous prices.
But it all became worse than a pseudo-scandal, in fact.
(The practice seems to have been particularly popular in the tech sector.) In 2007, New York City's municipal employee pension fund sued Apple over the backdated options.
A federal judge dismissed the case but class-action lawyers working for the pension fund kept the litigation going.
Eventually, Apple settled the case, to the tune of .5 million.
Here's how Ira Stoll from Future of Capitalism, describes the terms of the settlement: Ted Frank, the president of the Center for Class Action Fairness and a leading tort-reform advocate, is making the case that the settlement is worse than nutty and unfair. Indeed, it seems the center is planning to contest the settlement in court, provided it can find people who invested in Apple between 20 who are willing to be named as plaintiffs. Surely there are plenty of Apple investors who don't want to see Apple pay .5 million to settle this kind of nuisance lawsuit.
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We'd all have been better off if backdating was seen for what it really was: a rational response to an irrational accounting rule.