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Before SOX, we find that 13.55% of exercise-and-hold transactions by CEOs occurred on the day the stock was at its lowest price during the month (i.e. After SOX, only 7.20% of CEO exercise-and-hold transactions occurred on that day.
Consistent with the prediction that backdating an exercise-and-hold transaction is driven by personal tax considerations, we find that the likelihood of a suspect exercise is increasing in the potential taxes saved by the option holder from exercising on the day of the month with the lowest closing price before SOX, but not after SOX.
If the outsource provider has a supply disruption, for whatever reason, is there a process in place to report in a timely manner the financial impact of the disruption? You also need to identify controls in the process and decide how they relate to financial assertions and other material events.
Once that is complete, and assuming you've discovered you have some work to do, the remediation process will need to take place.
, we investigate the opportunistic timing of stock option exercises by insiders.
We focus on a group of exercises where there likely exists both the incentive and the ability to backdate an option exercise: exercises paid in cash where the insider holds the acquired shares.
Supply chain managers need to bring these concepts to the attention of their SOX owners so a resolution can be achieved that will enhance the supply chain for the betterment of the company.
We find that exercise-and-hold transactions tend to occur at monthly stock price lows.
The legislation has brought the need to have transparency in financial statements to the forefront of corporate issues. It is the supply chain leader's responsibility to interpret the impact that SOX compliance has on a company's supply base and to work with the company's compliance leaders to ensure that supply chain processes have appropriate controls.
The Issues and Implications for Supply Chain Leaders While there are clear SOX implications throughout all areas of Supply Chain Management (SCM), the law does not mandate how a company must address them.
In the area of Supply Chain Management, we are making deals and agreements each day that may contain vital information for the CFO or chief compliance officer.
If any of our agreements have provisions that call for a financial obligation or penalty, we should be advising the CFO or CCO of these obligations.