What prompted the current furor over backdating?
Pell: The practice of backdating goes back many years, but only came to widespread attention with an academic report written a couple of years ago by a researcher at the University of Iowa, Erik Lie. He studied the movements of thousands of companies’ stock prices after the award of stock options between 1992 and 2002, and concluded that there had to have been illegal backdating. This captured the attention of the SEC and the Department of Justice, which, in the wake of the Enron and Worldcom scandals, have become even more vigilant about accounting irregularities and improper disclosure that may occur with backdating. This in turn fed the interest of the press. Since then, the issue has exploded. Q: If a company is targeted for investigation, what should it do? Pell: Companies should immediately examine their stock option policies and launch a complete and thorough internal investigation, including with respect to accounting issues. If they do uncover any irregularities, they should i
