Brocade backdating scandal


How will the SEC handle the more than 100 backdating investigations on its plate? Brocade Communications Systems has agreed to pay a million penalty to settle allegations over improper stock-options grants, making it the first company to pay a fine in connection with the backdating scandal.Law360, New York (June 3, 2008, AM EDT) -- Data management company Brocade Communications Systems Inc.Another consequence is that the company underrepresents the real nature of an executive’s compensation, perpetuating the myth that options are performance-based incentive compensation.

All stemming from the practice known as “options backdating.” Options backdating occurs when a company issues stock options on one date, but reports in its financials an earlier issue date to create a “strike” or exercise price equal to the earlier date’s lower price.Other similar practices are being reviewed by government officials as well.


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