options backdating

Options backdating is when a company gives its employees stock options (the right to buy shares in the company at a set price on a set date) at an earlier date than when those options were actually approved. This allows the people receiving the options to buy the stock at an earlier, lower price than they would usually be able to, which can result in extra money or free shares. It is illegal because it gives employees an unfair advantage which is not available to other shareholders, and because it can be used to hide the true cost of sharing the profits with employees from investors.