“During a critical period between 2000 and 2001, decisions on stock options grants at Apple were made not by an independent committee of directors but by the company’s board — and potentially, CEO Steve Jobs,” Troy Wolverton reports for TheStreet.com.
Such decisions at Apple, including who receives options and their grant date, are usually overseen by a compensation committee comprising two to three independent directors. Some Wall Street analysts have suggested that bureaucratic layer is why Jobs won’t be implicated in the company’s ongoing probe into ‘irregularities’ it has found in options grants made between 1997 and 2001,” Wolverton reports. “But that hasn’t always been the case. From April 2000 to August 2001, Apple’s board didn’t have a compensation committee, according to the company’s regulatory filings. Instead, decisions about options grants and executive pay were left up to the board itself.”
“At that time, Apple’s board included at least two directors that the company itself didn’t consider to be independent, Jobs and Jerome York, who was then CEO of MicroWarehouse, an online and catalog retailer that accounted for about 2.9% of Apple’s sales in fiscal 2001,” Wolverton reports. “The extent to which Jobs participated in board discussions about options during that time period is unclear from Apple’s filings. In a proxy statement filed in March 2001, which covered the company’s fiscal year ended in September 2000, the company said Jobs ‘does not participate in deliberations of the board concerning executive compensation.’ But the company did not clarify whether Jobs recused himself only from discussions about his own pay as CEO or from all discussions about compensation for top-level management or options grants to them.”
Full article here.
Related articles:
Disney: no material impact from Pixar options – August 09, 2006
Pixar options draw scrutiny – August 08, 2006
Apple stock options scandal? What scandal? – August 07, 2006
Class action lawsuit over stock options filed against Apple Computer, Inc. – August 04, 2006
Wall Street forgiving of Apple’s stock option irregularities; CEO Jobs unlikely to be terminated – August 04, 2006
Apple’s stock option irregularities escalate into a scandal as world awaits Steve Jobs’ WWDC keynote – August 04, 2006
Apple warns of profit restatement dating back to 2002 – August 04, 2006
Apple loses 3.5% to $67.15 in premarket trading – August 04, 2006
Apple announces update regarding stock option grants – August 03, 2006
Shareholder’s options suit against Apple alleges ‘striking pattern that could not have been chance’ – July 11, 2006
Apple announces update regarding stock option grants – July 05, 2006
UBS: stock options probe unlikely to hurt Apple – June 30, 2006
Apple joins growing list of companies entangled in stock option ‘irregularities’ – June 29, 2006
Apple to investigate stock option grant ‘irregularities’ made between 1997 and 2001 – June 29, 2006
The record reportedly shows that Steve Jobs did not exercise options granted during that period. That would put him out of the line of fire for prosecution. Can you say trolling for dollars, hits and bylines?
This is serious. I know we all like Steve, but all of the persons involved in this seem to be connected to him. In light of that team keynote where he obviously tried to show that he is not the only person at Apple, I think it’s possible that he may be stepping down pretty soon
Just because we like Jobs and his products that does not makin him a person beyond reproach. I hate to break your dream guys be Steve also uses the bathroom.
Troy Wolverton is a noted AAPL basher whenever he gets a chance and has a track record of sensationalising stories about the company, and Steve Jobs.
For the love of accuracy, “lets [sic] be real,” could you please take a couple of extra seconds to proofread what you write?!
It’s hard to agree (or disagree) with you if we can’t understand what you’re saying (writing)!
Remember that at best, Troy Wolverton only makes qualified positive comments about Apple. Most of the time his articles about Apple or Jobs have a negative and/or cynical angle, even after Apple’s best quarters. Do consider the source when Troy Wolverton writes about Apple. He knows only slightly more than the rest of us – and probably considerably less than than the people actually investigating the matter.
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I thought “lets be real” was doing his Jar Jar Binks impersonation.
Sooo…
A company makes tons of money, including for its investors, and a small percentage of that money made is tied up in some stock option irregularities.
I’m sorry I’m really failing to see how this is such a big deal. Someone makes me gobs n heaps of money and I’m supposed to be pissed that maybe they screwed up and a small fraction of the profits i made weren’t accurately reported and may be tied up with some of the people responsible for making that money..
Meh…
Next story please..
This is the type of thing for which you have “prosecutorial discretion.” Jobs, hopefully, recused himself from those discussions, even if he was on the board. Further, he didn’t exercise any of the options in question. I also believe he returned them at one point, though I’m not as sure on that one.
So, there’s not much of a crime. Only an over-zealous, politicized, a**hole like Spitzer would prosecute something like this. Let’s hope they don’t have one of those on the West Coast.
Twilightmoon,
Your thoughts are very similar to the thinking at Enron by the internal overight committee there. They felt that if the actions were producing money for the stockholders, then ‘see no evil’.
The period in question was the end of the dark epoch for Apple, and there may have been pressure to cut corners, in itself not too much of a problem since their fundamentals todays are universally thought to be solid and have legs. The problem for investors is that everything is based on the key man, and with the exception of Ives, there’s no comaprable visionary waiting in the wings, so anything that might compromise Jobs’ performance is worrisome.
The problem is that the SEC does not apparently laid down hard and fast rules for stock options or any other kind of bonuses.
For example: If company X is of size Y then they have to make compensation decisions by Z number of independent reviewers.
This is also what the accountants are supposed to check on.
There are a lot of loopholes is business. The SEC should be calmly closing these as they come up and make clear rules thereafter on how they expect companies to conduct themselves.
This should all come down to what the true financial impact of the misstatement is. From what I’ve been hearing, it’s much ado about nothing. This isn’t an Enron situation. It’s not like we’re going to learn that all of Apple’s profits are vapor and the stockholders have all been ripped off.
In the end, Steve ccannot be forced out by the SEC. If there is criminal fraud, the FBI can prosecute and send him to jail, but I don’t think that is what happened here. (See today’s news on Comverse Technology as an example of options fraud that will send some people to jail)
If there are securities violations or accounting problems, a SEC settlement can bar Jobs from the board of a publicly traded company or being an officer of the company (ie. President) , but cannot prevent a company from keeping him in an executive position. This is why Martha Stewart is still working at Martha Stewart Omnimedia. Even without a corporate title, I find it hard to believe that she isn’t still calling most of the shots over there.
Everything that goes on at Apple is touched and okayed by Steve Jobs.
Since Apple is a high profile company the SEC will want to make an example of Apple.
Remember Martha Stewart and what she had suffer (jail time +) for just selling a relatively small amount of stocks on insider trading.
I think Steve´s hocus-pocus with declining stock options makes it even worse. Kind of like he knew it was wrong and tried to cover his butt by suddenly declining them.
And keep in mind Apple is saying it will restate profits back 5-six years – that is a long time and a big deal. In all that time they had no legal advice saying that what they were doing is wrong? Hard to believe.
“From: lets be real
Aug 10, 06 – 11:47 am
Just because we like Jobs and his products that does not makin him a person beyond reproach. I hate to break your dream guys be Steve also uses the bathroom.”
I am shocked! Steve Jobs uses the bathroom! Holy Moly!!!!! That puts everything into perspective.
It’s now official-We have become Bolsheviks! Community property is next. Why is it a crime to make money any more?
The stock options/exec pay scan dal is about manipulating option grant dates to affect the increased value of options. The concern is that pricing would affect the ability of outside investors to make a fair return on their investment. I don’t know of anybody but the exceedingly dumb who have not done very well on Apple Computer Stock. As Apple does not pay a dividend, the only money to be made is via the growth in the value of shares.
Fess up people, who has lost a dime investing in Apple? Apple has been a stellar performer and made a bunch of people a ton of money. If memory serves me correctly the stock could have been bought for as little as $10-11 (US) less than 5 years ago and now trades (post 2 for 1 split) in the $60-65/share range. Otherwise, your $10 share is now worth between $120-130. I own shares in Apple and will continue to do so. No lawyer needs to contact me because there is no tort here.
let’s be real
Yeah but I bet is prettier than Bill’s
OMG did I say that/
Still all I read or hear is 100% speculation. Let’s hear/read some facts!