Exploring Corporate Governance Around the World

By Allison Garrett, Senior Vice President for Academic Affairs at Oklahoma Christian University

Thursday, April 05, 2007

Congressional Research Service Backdating Report

The Congressional Research Service issued a report last month on stock option backdating. The report is available here. Of particular interest are pages 8 through 10 in which the CRS lists -- without attempting to quantify -- possible costs associated with the backdating scandals. Companies take earnings hits, their debt rating is downgraded increasing their cost of capital, some companies will be delisted because they cannot produce earnings in a timely manner, companies may owe additional taxes and many companies will spend a tremendous amount of money investigating or responding to backdating allegations.

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