However, the date written on the front of the contract cannot necessarily be relied upon as being the date the contract came into force.This will depend upon the parties’ intention and when the other elements of a contract formation were satisfied (these being offer, acceptance, consideration, intention to create legal relations, and certainty of terms).I will let Chairman Olson speak to the steps the PCAOB is taking to address these issues from the auditing regulator's perspective, but I'd like to assure the Committee, and the public, that the Commission is working in close cooperation with the PCAOB in this important area. But here is a typical example of what some companies did: They granted an "in-the-money" option-that is, an option with an exercise price lower than that day's market price.They did this by misrepresenting the date of the option grant, to make it appear that the grant was made on an earlier date when the market value was lower.This date can be in the future or the past – whether a contract can create or confirm rights relating to events in the past is a matter of interpretation.Parties may be in negotiations for months before the date of the contract and then refer to the date they started negotiations as being the effective date.
These dates indicate when the contract or parts of it are due to have legal effect, if these dates are different to the contract and/or signature dates.
I appreciate the opportunity to explain the Commission's initiatives to deal with abuses involving the backdating of options.
I am especially pleased to testify together with Chairman Mark Olson of the Public Company Accounting Oversight Board.
The purpose of the new executive compensation rules is to make the CEO's pay understandable to the shareholders who own the company.
Of course, no new SEC rules would be necessary to make executive pay transparent, if executives were all paid in the form of salary.