From a shareholder's perspective, nobody likes to be lied to when providing the financing and paying the salaries.
(See also: .) In the early 2000s, new accounting provisions were enacted that required companies to report their option grants within two days of their issue and also required that all stock options be listed as expenses.
Performance-based compensation, on the other hand, was deductible.
But how does that relate to hiring prostitutes and drugging customers without their knowledge?
Said another way, do the feds really need to dig that deep to find enough rope to hang executives with?
Although this practice gave the senior executives significant stock holdings, since the grant was issued at-the-money, the share price had to appreciate before the executives would actually earn a profit.
A 1982 amendment to the tax code created an incentive for executives and their employers to work together to break the law.