The Securities and Exchange Commission will set down the ground rules this summer for the timing of companies to issue stock option grants, says SEC chairman Christopher Cox.

Now, to my way of thinking the backdating options is a fundamentally corrupt practice. Setting the grant price at a level which will guarantee the executive is in the money effectively turns performance pay into guaranteed pay. It also means that the executives, unlike the rest of the population, are getting shares at the price they want with no downside risk.

Well, that's putting it simply. Cox has told reporters that it's more complicated because it might not be illegal if it's disclosed, if it's allowed in the company's compensation plans and if the accounting is kosher.

"Back-dating ... can be illegal and might not always be illegal depending on the facts and circumstances. We're going to weigh each of these cases on those circumstances."

But the SEC guidelines coming down are part of a broader crackdown on cosy options scams.

Cox has already announced that the SEC will also be looking closely at the practice of "spring-loading" where companies deliberately schedule an option grant ahead of expected good news or delay it until after it discloses business setbacks that are likely to send shares lower.

Now there's a practice that smells like insider trading.

And alarmingly, it's quite common among well-known corporations, according to research from the Corporate Library.

The research found that companies would announce positive earnings just days after granting stock options to top executives and
board members.

No prizes for guessing what happened to the share price. Remarkable timing, isn't it?