The HLS Program on Corporate Governance recently released a study by Professor Lucian Bebchuk and co-authors Yaniv Grinsten and Urs Peyer, which examined the use of stock option backdating.
The discovery of backdated grants, currently the subject of intensive SEC investigations, has led to the forced resignation of many corporate executives and directors.
The study investigates the causes and consequences of option backdating during 1996-2005, and focuses on “lucky” grants, which the study defines as grants awarded at the lowest price of the grant month.
It finds that:
“Our results establish a link between option backdating and corporate governance,” says Bebchuk. “They also identify pools of option grants in which the incidence of manipulation has been especially high.”
Lucian Bebchuk’s earlier work on executive pay includes his book, written with Jesse Fried, “Pay without Performance: The Unfulfilled Promise of Executive Compensation”.
A copy of the study is available here, as well as Professor Bebchuk’s website.