“The Securities and Exchange Commission is widening its investigation into Steve Jobs’s handling of stock option grants after it emerged that the Apple chief executive had signed an options package for a Pixar ally during his time running the film company,” Tom Bawden reports for The Times.
Bawden reports, “Mr Jobs, who headed Pixar for 15 years until last May — as well as running Apple for much of the time — in 2001 signed off on a particularly well-timed options grant for John Lasseter, director of hit films such as Toy Story and A Bug’s Life, according to SEC filings.”
“By allegedly backdating the day on which Mr Lasseter was granted the option to buy 1 million Pixar shares by more than three months to December 6, 2000, their lowest point in the previous year, the potential pay-out was significantly increased, the filings show,” Bawden reports.
Bawden reports, “By the close of trading on March 20, 2001, the day before the contract was signed, Pixar’s shares had climbed 24 per cent, increasing Mr Lasseter’s potential profit by $6.4 million.”
Full article here.
[Thanks to MacDailyNews Reader “Thorin” for the heads up.]
SeekingAlpha reports, “Walt Disney Co., Pixar’s current owner, is conducting an internal probe into its options dating practices, and ‘people familiar with the matter’ say federal prosecutors are awaiting its conclusion. Jobs sits on Disney’s board and is its biggest shareholder. The SEC is already investigating Jobs’s role in options backdating at Apple; an internal probe recently cleared him of wrongdoing, but said he ‘was aware or recommended the selection of some favorable grant dates.'”
Full article here.
MacDailyNews Note: Again, a reminder that backdating itself is not illegal, but backdated grants must be disclosed to shareholders and accounted for correctly. The disclosure and accounting practices are the issues in both the Pixar and Apple investigations.
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This does not bode well for Mr. Jobs… this could have serious legal ramifications, including prison time.
I wonder how much of this is being pushed by Bill Gates.
MacLaw,
Your name should be “MacYouWantFriesWithThat?” for you have absolutely no idea what you’re talking about.
Jobs will be just fine. Don’t you worry your empty little head.
MacLaw,
Spreading a little FUD this morning.
MacLaw…using Rovian tactics to spread panic.
So, what’s next, Fearmongers.. Steve Jobs is the father of Anna Nicole Smith’s daughter?!!
I think any attempt to predict how Mr. Jobs will fare as a result of the investigations is FUD. We do not know what went on and whether there were or were not irregularities in disclosure and accounting requirements. So whether you say Jobs is fine or Jobs is going down, it’s all idle speculation. I’ll bide my time and withhold judgement until the process reaches the point where the authorities release their conclusions. Then we’ll have something to argue with (and I expect the fur to fly).
I think these Jobs/options things are a set up. He’s not that driven by money so he doesn’t pay much attention subsequently The Street can’t exert much influence over Jobs and his business. With the rise of Apple Wall Street stands a serious risk of losing all those MS monopoly/extortion profits.
Steve is a victim of not paying respect to Wall Street so they will do almost anything to get him. I am sure when it comes to accounting he would leave it to the accountants and take their advice, he hired what he thought were the best guys – best in terms of accountancy is a very tricky one to call.
Accountants are really insidious, they deflect business managers attention away from making great products that people want to buy. They have plenty of dubious ideas about how to maximize their interpretation of the rules and the rules change on a regular basis.
When computing became mass market and spreadsheets were invented I was really looking forward to the end of accountants as we know them. All they do is maths and apply a few rules, their jobs should have been completely eliminated because computers do these tasks very successfully. Instead accountants have more power and take an even bigger slice of world wealth. Something is really wrong with this picture.
Steve Jobs made that point repeatedly around the launch of the iTMS, And the concept is a good one. However, backdating stock options to the most favorable date, legal or not, is nothing more than stealing from shareholders and investors. The difference in value that adjusting the dates creates comes out of their pocket.
I agree with Gandalf. Think about how many people and investment firms
are tied to MS’s fortunes. Think of the power and influence Bill Gates and
MS have. Apparently, the BBC is now joined at the hip with MS, which
makes sense considering how they cover Apple. The corporate media
definitely has its own agenda–see chearleading of invasion of Iraq prior
to the war. MS has had direct ties to NBC (GE), the Washington Post, Slate.
The media is doing its best to keep MS in the forefront while doing
everthing possible to trash Steve Jobs and Apple. I do not trust anything
that comes out of corporate, mainstream, bought-and-paid-for media.
Oink.
Pllleeeeaaaasssseeeee….if the American “justice” system can let O.J. off of murder, what’s going to happen here?
The powers that be can work to bring down a rising underdog through legal FUD. A must see movie about on this topic is George Lucus’ sleeper “Tucker, the Man and his Dream.” http://imdb.com/title/tt0096316/
Jeff Bridges plays the role of the real-life Preston Tucker who, after WWII, tried to make a “4th car company,” competeing with the Big Three in Detroit through innovation (unheard of things like seat belts and other saftey features). At first the press heralded the car as the future and the as yet unfinished Tucker car was the darling of the media. The Feds. prompted by a powerful Michigan senator (on the dole of the big 3), conducted an investigation of stock fraud that had no basis. The investigation soured the public on the product. I won’t give away the ending, but it is very applicable to what is happening to Jobs now.
every bad thing that happens to Jobs is not Gates doing guys, are masters of our own desitny. He is not a kid nor above the law. I don’t want to see him take a fall but for pete’s sake people grow up
Deleted!!!
People keep focusing on the fact that backdating stock options making the awarded executive more money, as if that’s immoral or as if that even means anything. When Steve Jobs was giving John Lasseter a lot of money for his service, he gave it in such a way that it was even MORE! Wow. Oooh. Aaah. Who cares? There is nothing wrong with giving someone a stock option in such a way that it is intentionally advantageous regarding price. You are compensating this person! You are SUPPOSED to be giving them money.
The only problem with backdating is not actually the extra money made or the extra advantage leveraged. The problem is in a nutshell, reporting requirements. Currently the reporting requirements are that stock options have to be reported within a few days, so by backdating a stock option award MORE than a few days, it becomes physically impossible to comply with this rule. The idea is that the shareholders deserve transparency: NOT that it is wrong to try to grant executives stocks at an advantageous time — BECAUSE THIS IS PERFECTLY LEGAL. If you can use your insider information as CEO to grant an employeee stock options at a price that you KNOW will be its lowest point (because you know about upcoming product announcements, et cetera), there is NOTHING ILLEGAL about seeking, granting, or accepting this kind of advantage. As long as it is reported.
THE ILLEGAL PART OF IT HAS NOTHING WHATSOEVER TO DO WITH THE PRICE OF THE STOCK OPTION, OR WHETHER THE PRICE WAS LOWER AT THE BACKDATED TIME, ETC, BECAUSE NONE OF THAT IS ILLEGAL! ONLY THE MISSED REPORTING DATE IS ILLEGAL!
But everybody keeps talking about the financial advantage gained as if we should be angry. THIS IS COMPENSATION IT IS SUPPOSED TO CONFER A FREAKIN’ FINANCIAL ADVANTAGE. So the result is that this sounds to everybody like something close to embezzlement, when really all it is is missing paperwork.
The press pretty much universally sucks and I’ve decided that I’m going to live in a cocoon.
Who cares…
go after REAL criminals…
The Bush Administration and the neocon minions.
I have said this before-I think Michael Dell has something to do with this investigation. I mean he is pushing the buttons here. I also think there are people in circles we can’t imagine from Bush to Dell to Gates to the skull & bones buddies. It is a good ol boys club thing and SJ isn’t invited.
Well, there goes AAPL.
I think I’ll sell off and pick it up at a bargain discount later on.
I’m glad to see some reasonalbe discussion about this.
The sad fact is everything becomes politcal once you reach Apple’s level of visibility, importance and Steve’s status. Of course Apple is a threat to M$. (You decide how much threat, small, large, whatever, but the fact remains. They are competitors, duh.)
Of course those sympathetic to M$ (like BBC, MSNBC, etc) are going to run negative stories. It’s not a conspiracy. It’s human nature.
Apple has enemies, like any other large, successful company with competitors, and probably even more so. And once a story starts to run it gets picked up everywhere and echoed everywhere.
So, it’s a political environment and situation with all this FUD. It’s not a question of facts so far, it’s all been a question of suspicions, as reported in the press.
It’s mind-boggling how much attention Steve gets over this FUD spreading when there are hundreds of other companies also under investigation (including Dell, I believe).
IMO the SEC is partly responsible for creating this mess themselves with shifting, unclear and changing reporting regulations… and I hope they can streamline these issues without being heavy handed towards the errors and mistakes and confusion that has resulted ubiquitously.
But what do I know… I’m just a lay person seeing all the FUD and press flying by like everyone else.
I appreciate it when MDN and others try to separate fact from speculation.
>DB wrote: … So the result is that this sounds to everybody like something close to embezzlement, when really all it is is missing paperwork…
DB, you seem knowledgeable on this subject. Since I don’t know any better, I’ll assume your points are valid.
But it may in fact be more than missing paperwork.
Perhaps *why* the paperwork is missing is of importance. Was it intentional? Was there explicit action in continuing the secrecy?
All,
Please bear in mind that the lead prosecutor investigating this case was recently fired by the Bush Administration and was also recently hired by a law firm that has Represented Apple Computer in the past.
This story came out about a week ago and was covered here on MDN.
So if we are generating conspiracy theories here we might want to include the thought that SJ has something to do with this strange turn of events. While it appears the firing was just part of more Bush and co cleansing of non Rightwing, nut jobs from the executive branch the subsequent hiring of this lawyer by a law firm will ties to Apple smacks of at least the intention to exploit this major setback for the prosecution.
iJail
“Stealing is Bad Karma” wrote:
“However, backdating stock options to the most favourable date, legal or not, is nothing more than stealing from shareholders and investors. The difference in value that adjusting the dates creates comes out of their pocket.”
Actually please explain how this steals from investors?
Either way, if someone is granted 1 million shares, the liability of 1 million shares is the issue for investors/shareholders (by the way what is the difference between these two that you make the distinction?)
As noted backdating is not illegal, as long as it is disclosed appropriately (which is more about good governance).
The fact is, if Lasseter was issued 1 million shares when the shares were valued at $4 or 1 million shares when the shares were valued at $5, the liability to shareholders is the 1 million shares.
The difference is that Lasseter could gain more if the shares were now worth $6, if he was issued the shares with a $4 option price.
Remember with options, the $4 is what he has to pay for the shares and the amount he makes is the difference between his “option price” and what he eventually sells them for.
The people buying his shares are ALSO not disadvantaged as the $6 is what the market is pricing the value of the shares at that time.
The issue of backdating ONLY increases the potential gain for the person getting the options.
The issue of disclosing it is about good corporate governance, and transparency in what executives are “remunerated”.
Now there may be moral questions about this practice, but I fail to see how this practice steals from investors (who are all shareholders).
If I am missing something, I am happy for someone to enlighten me, but I can only see this as a gain for the person receiving the options, and I cannot see how this is a downside for investors, in fact as an investor, I see it as possibly a good thing, in that rather than Apple/Pixar giving 2 million shares struck @ $5, (to be potentially sold at $6 to make $2 million), they give 1 million @ $4 (to be potentially sold at $6 to make 2 million). This way the liability for the company (and hence my liability) is only 1 million outstanding shares diluting my share of the company, and not 2 million.
As I said I may be misunderstanding this whole option thing, happy for someone to explain how this practice disadvantages the investor.
Then there is the other issue in this matter.
Even if the SEC finds issue with what Jobs has done, since this isn’t a criminal offence, there is nothing they can do, except report it back to shareholders for them to deal with.
What Apple/Disney/Pixar investor in their right mind would ask for Steve Jobs to be sacked over this issue?
They will be ensuring that they lose money, as there is no doubt that the day Steve Jobs leaves these companies, be it retirement (hopefully), death, or being dismissed, the shares in Apple (and probably Disney) will take a dive. In fact the losses would likely be more if he is ousted in a scandalous manner.
My 2 cents,
Luke
This is serious stuff for Lord Jobs. For those of you in denial, I assure you it’s not nothing. As long as Stephen P. Jobs continues to deal with this with arrogance, hubris, and dismissing it as “it will work out just fine”, the powers that be (hard to believe there are some more powerful than the World’s Smartest Man) are going to keep him square in their sights until they can declare – lesson for all corporate manipulators: we’re serious about obeying the law, don’t mess with us.