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No one's pay was "inflated" by backdating, unless you assume that the alternative would have been awarding executives exactly the same number of options at less-advantageous prices.

Which, of course, you shouldn't assume since any sensible employee can see that if his each stock option is worth less, he should get more of them.

The modern history of options trading begins with the 1973 establishment of the Chicago Board Options Exchange (CBOE) and the development of the Black-Scholes option pricing model.

Stock options are defined by several key characteristics.

But Apple makes clear that Jobs was directly involved in some instances of backdating.

The investigation "found that CEO Steve Jobs was aware or recommended the selection of some favorable grant dates." The committee hastens to add that Jobs "did not receive or financially benefit from these grants or appreciate the accounting implications." In other words, he didn't recommend backdating his own option grants.

The academics concluded that something funny was going on.

The earliest known options trade dates from 7th century BCE.Granting stock options to employees is a generally accepted and perfectly legal form of compensating employees. Critics of backdating argue that the practice is difficult to detect and thus encourages boards and executives to use it to synthesize more creative compensation packages.In our example, backdating the options is the same as giving John Doe a check for ,000 -- without recording that ,000 on the within two business days.The total compensation to executives granted back-dated options was either unchanged or, perhaps, lower than it would have been, since people tend to irrationally over-value a bird in hand (in the money options) to a dozen in the bush (out of the money options).But it all became worse than a pseudo-scandal, in fact.For instance, if the board meeting is on January 3, 2012, and Company XYZ stock closes at per share that day, then the exercise price of John's 2012 stock are backdated, then his exercise price is only per share.He pays the per share exercise price and can turn around and sell those shares on the exchange for each, netting a profit of per share, or ,000.After accounting for forfeitures, Apple was forced to recognize stock-based compensation expense of 5 million on a pretax basis that it hadn't done so previously.Apple has essentially blamed former chief financial officer Fred Anderson and former general counsel and board secretary Nancy Heinen, both of whom are no longer with the company.Still, given that (a) backdating helps make earnings look better than they are; and (b) Jobs is a huge shareholder of Apple (10.12 million shares, as of last April), how could he not benefit from this behavior? Jobs recommended some backdating dates for other employees.It turns out that Jobs did, indeed, receive backdated options—just not at his own direction. 18, 2001, when the stock stood at .01, the company gave Jobs a monster 7.5-million-share options grant dated Oct. By doing so, the company gave Jobs million in compensation for which it did not account properly. It also pretended the options grant was approved at a special board meeting, when no such meeting occurred. He received a massive grant that was approved at a phantom board meeting, though he didn't know about the phony meeting.