To try to answer some questions about what's going on, CNET has compiled the following list of frequently asked questions. Backdating, which refers to the practice of altering the dates of grants, is a way for employees of a company to make additional money from stock options.
While it's not necessarily illegal, in many cases it could be. The Securities and Exchange Commission said last week that at least 80 companies are the subject of a probe.
Also, some companies have independently confirmed that they've been contacted by federal investigators.
Those include Altera, Applied Micro Circuits, Asyst Technologies, CNET Networks (publisher of CNET News.com), Equinix, Foundry Networks, Intuit, Marvell Technology Group, RSA Security and Veri Sign. Stock options give the recipient the right to buy a share of a company's stock at a price called the strike price, which is equal to the value of the stock on a certain date.
But abuse of stock options has been allowed to perpetuate for years.
In all my reading of the backdating scandal coverage, I have yet to see a thorough analysis of the real victims of this scandal: shareholders.
You’d think that shareholders wouldn’t tolerate the use of accounting sleight of hand to compensate executives while bypassing the traditional “selling, general, and administrative” line in the income statement.
Backdating is dating any document by a date earlier than the one on which the document was originally drawn up.
Under most circumstances, backdating is seen as fraudulent and illegal, although there are some situations in which backdating can be used in a legal and beneficial way, such as backdating a claim for a past period.
Sometimes certain claims (such as insurance claims) can be backdated if the could not be completed at an earlier date, although there must be good reason for neglecting to claim in advance.
If your backdated claim is approved, you will be able to receive benefits from a certain date in the past.