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US technology employees may live on their salaries, but whether they get truly rich or not depends on their share of the company.While lucky early employees might get actual shares, most workers will depend on stock options to cash in on the tech boom.(who broke the backdating story), Jobs was awarded 7.5 million shares approved at Apple’s August 29, 2001, board meeting. However, because Jobs continued to argue over the point at which they would vest, Apple missed the deadlines it needed to file the right information with the Securities and Exchange Commssion and its auditors.It took until December that year until terms were finally agreed upon, at which point Apple’s stock price was .01.A stock option granted, for example, on the day you join the company allows you the right to buy that share at that day's price, but not until a fixed period - say a year - has elapsed.
Brocade Communications' Gregory Reyes has been sent to prison for 21 months and fined £7.5m for backdating options.Reyes is the first executive to go on trial, though others have settled cases with US financial regulator the Securities and Exchange Commission and paid not only fines, but millions of dollars of "ill gotten gains" in some cases. The simple answer is that the practice has not taken hold because of the quality of UK regulation.It is simply not an option for publicly listed companies to pretend that an option was granted days or even weeks ago.Also, the backdating of options brings with it accounting obligations: the backdating has to be recognised as a compensation expense.Academics had long recognised an odd phenomenon of share prices appearing to rocket on the day after senior executives were given stock options.
If the price has fallen, you simply do not buy the share.