The current focus on misdating of option-grants – usually by “back-dating” the grant date, whether by deliberate manipulation or sloppy recordkeeping – was triggered by a number of academic studies, notably one by Eric Lie, associate professor of finance at the University of Iowa, published in the May 2005 issue of Management Science, in which Professor Lie examined 6,000 option grants between 1992 and 2002 and found a strong correlation between the grant dates and market lows of the underlying stocks.

A related issue is spring loading – the timing of option grants just before the announcement of good news or shortly after the announcement of bad news. The legality or illegality of spring loading depends on the facts and circumstances of the options grants, but the issue is a strong focus of the SEC's new executive compensation disclosure rules.

Squire Sanders advises public companies, and their boards, especially on three aspects of this issue: (1) reviewing past option grants to determine whether they have a back-dating problem, (2) reviewing their option grant policies and practices in light of evolving best practices and (3) compliance with the new SEC rules on compensation disclosure in this area, including consideration of disclosure in their next 10-Q filings.