Bernile and Jarrell provide extensive analysis regarding the impact of backdating the stock option exercisepriceon stock returns for a sample of firms identified by theWall Street Journal. Dhaliwal, Erickson, and Heitzman investigate whether executives backdate the exercisedateto obtain favorable tax consequences. This discussion comment focuses on several fundamental issues that confront researchers examining the backdating scandal and other related decisions. Specifically, we discuss the decision models for executives engaged in backdating and the potential role of social networks among directors, selection considerations, institutional voting behavior, and how backdated options can be replicated with existing equity instruments.
