Corporate governance stock option backdating seventeen rules celestial dating

Posted by / 27-Aug-2014 12:25

Corporate governance stock option backdating

Non-audit services (NAS) have also been at the forefront of regulators’ attention in the last decade due to the economic bond that arises between the external auditor and the client, as a result of NAS purchases.

Although regulators have not provided convincing evidence that NAS impair auditor independence, investors perceive that NAS have the potential to impair auditor independence, and hence, the quality of the audit.

Given that audit committee members are responsible for approving the purchase of NAS, which has the potential to impair auditor independence, and that compensation has the potential to influence audit committee members’ objectivity, this study examines the extent to which the structure of the compensation provided to the audit committee member influences their approval of NAS purchases in the post-Sarbanes-Oxley period.

ABSTRACT: It is widely documented that managers tend to backdate their stock option grants so that a past date on which the stock price was particularly low is picked to be the grant date.We also find that backdating firms restructure CEO compensation to rely less on stock options.Finally, we learn the higher turnover extends to the General Counsel.Finally, we find that CEOs of backdating firms receive a significantly higher level of total compensation than their counterparts in non-backdating firms after controlling for economic determinants of executive pay, and that the predicted excess compensation arising from the board and ownership structure variables has a more negative association with future firm performance for backdating firms relative to non-backdating firms.The evidence is consistent with backdating firms having greater agency problems that negatively affect shareholder value.

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Collectively, the results suggest that the preferential compensation arrangements afforded more powerful CEOs is inconsistent with efficient contracting.

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