Options backdating is the process of granting an employee stock option that is dated prior to the date that the company granted that option.When done intentionally, the practice is equivalent to giving cash to the grantee at the expense of shareholders.Options backdating is the potentially illegal (depending on the country) practice of the grant of restricted Employee stock options at an exercise price equal to the value on the date that the grant is apparently made.
The company would then grant the option but date it at or near its lowest point.
Most of the legal issues arising from backdating are a result of the grantor falsifying documents submitted to investors and regulators in an effort to conceal the backdating.
This practice is a hot-button issue with investors all over the world and is currently being investigated/debated by the United States Securities and Exchange Commission.
If not for that rule, executives could still be hiding backdating options from shareholders.
Even after the rule, some executives got away with it for years because they could legally delay reporting option grants for so long that it was virtually impossible to figure out whether any individual grant had been backdated.