Final answer:
Backdating stock options is a practice where the effective dates on stock options are deliberately changed for the purpose of securing extra pay for management. It is considered unethical and illegal in many jurisdictions.
Step-by-step explanation:
The practice being described is called backdating stock options, where the effective dates on stock options are intentionally changed to secure extra pay for management.
This practice involves retroactively selecting an earlier date for a stock option grant, which can result in a lower exercise price for the options. This allows the executives to purchase the company's stock at a lower price and make a higher profit when they sell it later.
Backdating stock options is considered unethical and illegal in many jurisdictions, as it can mislead investors and inflate executive compensation. Numerous high-profile cases of backdating scandals have raised awareness of this practice and led to increased regulations and scrutiny on executive compensation.