In a December 28, 2009 press release (here), the plaintiffs’ lawyers announced the settlement of the Comverse Technology options backdating-related derivative lawsuit.
At first glance, call options represent the perfect way to tie an executive's level of compensation to the company's performance because as the company's share price increases, so does the payoff the executive will receive.
However, this concept is not perfect and there are ways that executives can take advantage of the way that options are granted in order to earn money.
Technically, any options granted today should bear a strike price of $45.
In a backdated situation, however, the options would be granted today (August 16), but their listed day of granting would be June 1 in order to give the options a lower strike price.
The settlement consists of a number of different components, the most significant of which is Alexander’s agreement to pay the $60 million to Comverse.