Shareholders of Apple, one of more than 100 U.S. companies being investigated for stock options accounting irregularities, will vote at their May 10 annual meeting on whether to change the rules on how options are granted.
The proposed change would use the average of the opening and closing prices of Apple shares on the date the options are to be granted and to establish and disclose the grant dates in advance. The rule change would apply to standard stock options granted to senior executives.
Apple’s board, in a U.S. Securities and Exchange Commission (SEC) filing disclosed Monday, said it opposes the rule change, stating that Apple has not granted stock options to any senior executives since 2003. Instead, the company grants shares of Apple common stock to executives, which are valued at the price the stock is selling at in the open market at the time they are granted.
The change is proposed by Amalgamated Bank LongView Collective Investment Fund, of New York City, and Connecticut Retirement Plans and Trust Funds, of Hartford, Conn. The institutional investors hold 308,135 and 488,615 shares, respectively.
Stock options accounting rules may have been violated in instances in which company officials changed the dates on which options were granted to a date on which the share price was lower than on the original grant date, giving the executive a greater profit when they exercise the grants.
Apple conducted an internal review in 2006 and reported that company officials had backdated stock option grants between 1997 and 2002 and that it would have to restate some financial results. The internal review said Apple CEO Steve Jobs was aware of a few instances of the practice but didn’t know the accounting implications and didn’t benefit from any of the grants.
The U.S. Attorney’s Office in San Francisco and the SEC are investigating Apple, as well as other companies.
Apple did not return a call seeking comment.