Corporate governance and backdating of executive stock options

Lastly, it provides a greater understanding of the compensation structure that better aligns audit committee members’ interests with those of shareholders'.

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Lastly, when the audit committee has greater power than the CEO, the audit committee mitigates the CEO’s influence and reduces purchases of NAS.

This study has practical implications for regulators, as it not only contributes to the debate on the ban on NAS, but provides insight into how the form of compensation plays a role in managing the potential threat to auditor independence, associated with the purchase of NAS.

Moreover, the tendency to backdate is stronger when stock options are more important in CEO compensation and when directors receive option grants on the same date as the CEO.

We also find that interlocking boards among backdating firms are associated with a higher incidence of backdating.

In this discussion, I provide some big picture thoughts on the Collins, Gong and Li (2009) paper (CGL hereafter) entitled: Corporate Governance and Backdating of Executive Stock Options.