By G.W. Schulz
So let's get this straight. In 2001, Bay Area-based Apple Computer Inc. gave 7.5 million stock options to its CEO, Steve Jobs. The options were approved by the company's board of directors at a meeting that never actually happened. The company also now admits that documents related to this imaginary meeting were fudged to make it appear that the necessary board approval had taken place.
The special committee formed by Apple to investigate the matter (which includes Al Gore) says no current member of management was aware of the falsified records. Jobs, the committee insists, was innocent, and as the public is often told during such controversies, the top exec was ignorant of the manipulation.
Steve Jobs sure gets paid a lot of money for a man who's clueless.
From the Chronicle:
"Apple said Jobs was aware of some instances of backdating and even recommended favorable dates to grant options. But, the company said, Jobs did not financially benefit from these grants and did not understand the accounting implications."
That's sort of like arguing that a casino patron who got caught counting cards didn't make a dime off it and had no idea how badly the hired muscle would kick his ass once they got him outside. He was still counting cards.
Apple has had to restate its financials to reflect $84 million in additional compensation expenses.
For the record, backdating is legal. It's one of the many creative compensation plans corporations like to offer their top executives. The common explanation for such awards is that they enable the company to compete for the best executive talent the world has to offer. (Top-heavy nonprofits and some government agencies like to argue the same thing.) Options gave Jobs the right to buy Apple stock at essentially a predetermined price, affixed to a date when their value is lower. If Jobs performs well, the stock price goes up, so when he sells, he makes a killing.
Backdating takes it one step further by later picking a point on the calendar when the stock was valued as low as possible, so the windfall is even bigger and Jobs can buy another gold-plated beard trimmer or a box of Just for Men hair dye or whatever the hell he does with all of his money.
The caveat is that when backdating takes place, it must be properly disclosed in Securities and Exchange Commission filings. Free marketeers like Thomas Friedman at the New York Times love to talk about transparency and how we're global economic badasses 'cause we got an SEC to enforce it. In order for, say, Thailand to compete, it must also adopt transparency so that foreign and domestic investors will confidently put their money into that nation's economy.
Here in the United States, the free marketeers say, we've got a robust business press and the Securities and Exchange Commission to ensure that everything good and bad about Apple is revealed publicly so that you'll feel safe putting money into the company, which the company will use to hire bright people, and the bright people will develop bold innovations, and the bold innovations will make Apple money, and then Apple can pay back its investors. Awash with activity, the economy is fortified and the world gets to listen to virtually all of the metal it can handle through iPods. (I like metal. Give me a break.) In order for us to remain competitive, Jobs and anyone else in his position must disclose backdating.
It's all about transparency.
(By the way, the industrial unions have every right to laugh their asses off right now. The next frontier of the U.S. economy was supposed to be based on service-sector positions. Re-train the blue-collar folks and put them behind computers, the pundits argued. If you don't re-train, you'll be left behind. White-collar jobs won't be outsourced, we were told. But they are being outsourced. The Reuters news service has, in fact, begun shipping its reporting functions to India. Someone should call Friedman and ask him how robust he expects the business press will be in the future with all of this cost-cutting going on at corporate news outlets. It was reporters at the Wall Street Journal, not federal regulators, that helped discover and reveal the Enron scandal using, you guessed it, SEC filings.)
Apple's board, from which its special investigative committee was drawn, had a major incentive to protect Jobs, according to the Chron.
"For its part, Apple has worked to shield Jobs, who co-founded the company three decades ago. Jobs has since become synonymous with its success and is credited with overseeing Apple's transformation into a consumer electronics and entertainment powerhouse. Analysts have said that if Jobs were forced to leave the company, his departure could cause a plunge in Apple's stock price and jeopardize its dominance in key markets."
Now it's up to federal regulators to decide just how much we care about transparency. The U.S. Attorney in San Francisco, Kevin Ryan, has not only shown a major willingness to prosecute corporate criminals, but he's even been a pioneer in probing the backdating scandals. As a Bush appointee, he also sits on the president's Corporate Fraud Task Force. So will he go after Jobs?