Because the option value is higher if the exercise price is lower, executives prefer to be granted options when the stock price is at its lowest.Backdating allows executives to choose a past date when the market price was particularly low, thereby inflating the value of the options.The options exercises accounted for the bulk of Karatz's pay, The Journal said.
To correct its accounting for the backdating, KB Home said it expected to take charges of no more than million, according to The Journal.
SAN FRANCISCO (Market Watch) -- KB Home CEO, President and Chairman Bruce Karatz has resigned after an internal investigation found that he backdated his own stock-option grants to increase his pay and will forfeit about million in gains from the backdating, according to a media report Sunday.
KB Home said Karatz would be succeeded as CEO by Jeffrey T.
KB Home also said it has created the new post of non-executive chairman and will conduct a search for the position, The Journal reported.
KB Home disclosed in August it was conducting an internal probe of its options grants, after being contacted by The Wall Street Journal about an unusual pattern of well-timed grants.