After these stock option terms came to the attention of the IRS in 2002, it worked out a secret deal with Micrel that would allow Micrel to escape $51 million in taxes and required the IRS to keep quiet about the option terms.
Remy Welling, a senior auditor at the IRS, was asked to sign the deal in late 2002.
In a study that I started in 2003 and disseminated in the first half of 2004 and that was published in Management Science in May 2005 (available at I found that stock prices also tend to decrease before the grants.
Furthermore, the pre-and post-grant price pattern has intensified over time (see graph below).
To the extent that companies comply with this new regulation, backdating should be greatly curbed.