The academics concluded that something funny was going on.
The companies were awarding the options later but then marking the awards to earlier dates, when the stock's price was low.
Nejat Seyhun of the University of Michigan for the newspaper showed that that options granting practices between 20 often failed to comply with the Sarbanes-Oxley requirement that grants of awards to executives be reported within two days of board approval (T"he Dating Game: Do Managers Designate Option Grant Dates to Increase Their Compensation? Prior research at Erik Lie at the University of Iowa found a pattern of probable options backdating in a number of companies prior to 2002.
Beyond such negative controlling measures, a more positive empowering approach based on ethics may also be necessary.
What ethical measures need to be taken to address the agency problem?
"It's fitting that the Journal should be recognized for breaking the biggest business story of the year, using proprietary algorithms to uncover suspicious timing of stock options, and for putting in full context the enormous growth of China's economy," said L.
Gordon Crovitz, executive vice president of Dow Jones & Company and publisher of The Wall Street Journal.