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March 17, 2007

Disney, Pixar and Stock Option Backdating

It looks like the backdating of options at Pixar is not as serious as thought:

An investigation by Walt Disney Co. (DIS.N: Quote, Profile, Research) found that Pixar Animation Studios had backdated some employee stock options before it was acquired by Disney, Chairman John Pepper said in a statement on Friday.
   

Pepper said the probe found no one currently associated with the company had engaged in deliberate misconduct, a statement that appeared to clear Disney-Pixar Chief Creative Officer John Lasseter and Apple Inc. (AAPL.O: Quote, Profile, Research) Chief Executive Steve Jobs who sits on Disney's board.

   

The board decided that Disney should pay any additional taxes owed by employees who hold backdated Pixar stock options, Pepper said, adding that he expected no impact to financial statements as a result.    

Pixar, founded by Jobs, had awarded stock options to Lasseter when share prices were within a dollar of the annual low in 2000, according to securities filings. Pixar was acquired by Disney last year.

However, look at that statement about paying taxes. You see, backdating options is not in fact illegal at all. But, if you do backdate them to make them in the money at the time of award, then taxes should be paid upon that amount that they are in the money. That's what the whole scandal has really been about and it does look as if Pixar was at fault there. Otherwise, why be paying more taxes?

March 17, 2007 in Investment Scams | Permalink

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