Backdato, Inc. is a start-up company with low profits and a history of operating losses. It compensates its top executives, in part, by giving them shares of company stock in the month of January, after the prior year's financial results are known. For tax and financial reporting purposes, assume that the value of the stock received by these executives is considered a form of compensation as if the date on which they receive it.
During January, Backdato's stock traded on the New York Stock Exchange at $33 early in the month and rose steadily to $37 by the end of the month.
Although Backdato issued shares to its executives at the end of the month, the company's Board of Directors decided to back-datethese issuances as if they had occurred toward the start of January. Backdato's directors do not receive any shares themselves as compensation.
What do you believe were the motivations of Backdato's directors for back-dating the issuance of these shares?