Backdating Options

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OPTIONS BACKDATING

Student Number : 07977689

Name of Student : Benyamin Aryuda Rendyasputra

Module : Accounting in Context

Course Title : BA (Hons) Accounting & Finance

Word Count : 4457 words

Name of Supervisor : Eleimon Gonis

Date : 26th February 2010

Executive Summary

This project discusses the issue of backdating stock options which is initially believed to be triggered by weak corporate governance. However, there have been ongoing debates that it is not the only reason that creates such practice to occur. In this report, the arguments that classify backdating as a result of poor corporate governance includes lack of board independence, weak control & monitoring and poor regulation. Meanwhile, the arguments against this case are backdating arising from corporate sloppiness, inefficient flow of communication and company culture. These arguments are derived from academic journals and non-academic journals which are then reviewed based on methodology, reliabilty & relevance and theoritical underpinning. The report is designed to help companies in developing policy regarding to stock options and therefore, the practice of backdating stock options can be prevented. A further review is needed on determining the reasons that might lead companies manipulating their stock options.

(150 words)

Table of Content

Executive Summary 2

Table of Content 3

Declaration 4

1. TERMS OF REFERENCE 5

2. INTRODUCTION 5

3.1. ARGUMENTS FOR POOR CORPORATE GOVERNANCE 6-8

3.1.1. Lack of Board Independence 6

3.1.2. Weak Control & Monitoring 7

3.1.3. Poor Regulation 8

3.2. ARGUMENTS AGAINST POOR CORPORATE GOVERNANCE 8-10

3.2.1. Corporate Sloppiness 8

3.2.2. Inefficient Flow of Communication 9

3.2.3. Company Culture 10

4. CRITICAL ANALYSIS 10-14

4.1. Methodology 10

4.2. Reliability & Relevance 12

4.3. Theoritical Underpinning 13

5. CONCLUSION 14

BIBLIOGRAPHY 15

REFLECTIVE REPORT...