“A while back, one of my father’s best friends told him this: ‘Major corporations are run primarily for the benefit of those in the executive suite. Don’t forget it.’ Though his position as a top-level exec at many of the world’s biggest pharmaceutical companies made him an expert on the topic, I always kind of hoped he was wrong,” Seth Jayson writes for The Motley Fool. “Yesterday, Apple proved to me, once again, that he was speaking the truth.”
“Last night, the company admitted through a statement that superstar CEO Steve Jobs ‘was aware that favorable grant dates had been selected.’ Yet, in a bizarre semantic exercise, it simultaneously concluded, ‘The investigation found no misconduct by any member of Apple’s current management team,'” Jayson writes. “Apple’s special investigation unit apparently decided that there was neither harm nor foul, because Jobs ‘did not receive or otherwise benefit from these grants and was unaware of the accounting implications.'”
Jayson writes, “What a load. Jobs began his life as a programmer. Surely he’s capable of doing the basic math that reveals the following simple truth: When you backdate (or springload) options, you hand the recipients potential monetary gains in excess of those they actually deserve. Excusing Jobs simply because he didn’t benefit personally looks like another flimsy exercise in self-serving corporate-speak. Let me see if I get this straight: It’s OK for Jobs to know about and condone (whether explicitly or through inaction) options backdating, because he didn’t see any extra greenbacks flow into his wallet?”
“Of course, Jobs is too important to answer for shenanigans under his watch, even if he was aware of them. Instead, Apple served up perhaps the world’s scrawniest sacrificial lamb. CFO Fred Anderson fell on his sword, but don’t worry — it’s only a flesh wound. He’s already the former CFO, and now he’s just resigning from the board of directors. The only consequence for Jobs so far is the need to have his name appended to a terse apology from Apple corporate,” Jayson writes.
Jayson writes, “I have no doubt that this brouhaha will fade quickly. Jobs maintains his enviable spot as the media’s darling. Personally, I’d love to see what the response would be if this statement came from some Wall Street punching bag — say, Microsoft, Home Depot, Hewlett-Packard, or — heavens to Betsy — an oil company. Gates, Ballmer, Nardelli, Hurd, or any oil exec would have been tarred and feathered before morning.”
Full article here.
Apple’s not rotten at the core. Maybe a little wormy in spots, but not rotten.
Related articles:
Analyst: Anderson, Heinen may be former Apple executives responsible for irregular options grants – October 05, 2006
Analyst: Apple restatement due to options irregularities not expected to be significant – October 04, 2006
Apple’s special committee reports findings of stock option investigation – October 04, 2006
Shareholders allege Apple execs reaped ‘millions’ in unlawful profits – August 23, 2006
How options-backdating irregularities can affect your Apple Computer stock – August 23, 2006
Apple’s options imbroglio: Mac-maker granted options at or near key events in company’s history – August 18, 2006
Apple added to Nasdaq’s list of ‘delinquent companies’ – August 18, 2006
Apple unlikely to be delisted by NASDAQ – August 16, 2006
Apple CEO Steve Jobs drawn into stock options scandal – August 15, 2006
Apple announces update regarding stock option grants – August 11, 2006
As expected, Apple delays quarterly results due to stock-options grants review – August 11, 2006
Some stock options grant decisions were made by Apple board, and potentially, CEO Steve Jobs – August 10, 2006
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 $67.15 in premarket trading – August 04, 2006
Apple announces update regarding stock option grants – August 03, 2006
Shareholder’s options suit against Apple alleges ‘striking pattern that could not have been chance’ – July 11, 2006
Apple announces update regarding stock option grants – July 05, 2006
UBS: stock options probe unlikely to hurt Apple – June 30, 2006
Apple joins growing list of companies entangled in stock option ‘irregularities’ – June 29, 2006
Apple to investigate stock option grant ‘irregularities’ made between 1997 and 2001 – June 29, 2006
Jason is looking to get a free Zune from Micro$haft with this one.
“I want T.P for that Bunghole….”
Paleeze…… Say it for Gods sake, “Jobs Lied” or he didn’t, what a freak’n pussy.
All this text babble from bubble heads wanting to take down Lord Steve? It’s bloody preposterous, are you daft? Let me pass out a clue, “Steve saved Apple”, and the company would be toast without him, period, end of story.
Steve benefitted by having LOYAL people working for him, doing his bidding, making our favorite computer company immensely rich and successful. And what did Steve get? Only loyalty, no extra booty (not like he needs any).
Fred did a great job on analyst calls. He came in when the company was shit, gave it credibility and helped propell it financially up the road to success and poise Apple for explosive growth.
Nancy has been with the company for quite some time, I hope she got enough because her career is now OVER. Sad to see greed take out good people.
Apparently Seth Jayson puts the “fool” in Motley Fool.
“Jobs began his life as a programmer.”
No, he was a self-educated electrical engineer, not a programmer.
“Let me see if I get this straight: It’s OK for Jobs to know about and condone (whether explicitly or through inaction) options backdating, because he didn’t see any extra greenbacks flow into his wallet?”
Nope, you apparently don’t have it straight, Seth. Back dating is perfectly legal if done properly. What I understand the statement to say is that SJ didn’t know that it wasn’t being done properly. The fact that he didn’t benefit from it is mentioned to show that he wasn’t looking the other way on purpose.
“Apple served up perhaps the world’s scrawniest sacrificial lamb. CFO Fred Anderson fell on his sword, but don’t worry — it’s only a flesh wound. He’s already the former CFO, and now he’s just resigning from the board of directors.”
Anderson was the CFO for the majority of the period where the discrepancies occurred. That makes him responsible. The only reason anything is happening to Fred at all is because he still holds a position on the Board. Had he retired completely, nothing would have happened to him, and there would be no lamb whatsoever.
“I’d love to see what the response would be if this statement came from some Wall Street punching bag — say, Microsoft, Home Depot, Hewlett-Packard, or — heavens to Betsy — an oil company. Gates, Ballmer, Nardelli, Hurd, or any oil exec would have been tarred and feathered before morning.”
Doubtful. This isn’t an Enron type scandal. It probably won’t amount to much more than a blip in the overall stock price, and most shareholders won’t care because they’re still way ahead of the game. It hasn’t even been proven that there was any malfeasance at all. For all we know, it may have simply been an honest mistake. I doubt it, but it’s possible. The fact that Apple initiated the investigation themselves speaks volumes here.
Backdating options is not illegal or even morally or ethically wrong. A company can decide to give somebody 100 options or 1000 options; to set a strike price equal to, lower than, or higher than the current market value. There is nothing that says the strike price needs to be equal to the price on the day of issue. This is a tempest in a teapot.
Economan, finally someone says it succinctly.
You can set the strike price for options at anything as long as you follow the rules. Publicly traded stock can be trading at $200 a share and the option strike price can still be set at $0.01 if it is done properly.
There are so many intricate rules associated with non qualified stock options, qualified stock options, incentive stock options and even more variations based upon the total compensation package of the persons involved that anyone other than an accountant usually cannot keep them all straight. I would be extremely surprised if Jobs knows all the rules. He must depend upon his legal and accounting staff to tell him whether option grants are being done according to the then current rules. That’s why there are CFOs and chief legal counsels.
Jobs worked for Atari for a short time. He was a
programmer to some extent.
Jason, you’re a complete zune. Go away.
Re: Jobs programmer
Read this from MDN, it’s entertaining:
Why Breakout is the iPod’s default game – December 03, 2002
So many apologists, so little time …
It’s hard to tell what’s the worst aspect of MDN: the Apple fanboys or the corporate fanboys — or perhaps those who fit into both categories.
Like most people who worship companies, you will get your comeuppance when the company finally gets around to screwing you, which it will eventually, and inevitably, do. And then you will howl, and fuss, and stamp your feet at how unfair it all is.
But if you don’t care when they break rules that you think don’t affect you, then don’t expect them to suddenly “come correct” when it’s something that actually does involve you.
Lying about when stock options were issued — which is what backdating them and then not reporting the actual date they were issued is — is simply one example of corporate lying that you know about, because it was reported.
And if they lie in one area (particularly one that is overseen by a federal regulatory agency such as the SEC), they will undoubtedly lie in other areas, especially those that are less well-monitored.
That level of abstraction may be difficult for fanboys to grasp, but trying mulling it over for a while, while you’re genuflecting in front of your Steve Jobs shrines …
“Backdating options is not illegal or even morally or ethically wrong. A company can decide to give somebody 100 options or 1000 options; to set a strike price equal to, lower than, or higher than the current market value. “
Sure IF THEY ACCOUNT FOR THE VALUE OF THE OPTIONS PROPERLY. Apple did not do that. THAT IS WHAT IS WRONG.
Likewise Enron’s many off balance sheet entities would not be illegal IF THEY ACCOUNTED FOR THEM PROPERLY. Then investors would have known that the company was in the toilet.
Everyone thought Enron was great while the stock was going up…
“I would be extremely surprised if Jobs knows all the rules.”
I would be extremely suprised if he doesn’t know that a backdated in the money option is worth more than one granted that day at that day’s stock price. You don’t need to know much more than that to know that what you’re doing by backdating and recording them as if they’d been issued that backdated day is WRONG.
Jobs began his life as a programmer.
Jobs has done about as much programming as Bill Gates.
Never mind that WOZ was Apple’s tech guy.
“I would be extremely surprised if Jobs knows all the rules.”
Surely Jobs could afford to hire someone who DOES know the rules. Although I have a hunch SJ knew exactly what he was doing & just happened to get caught.
Should Jobs be forced out? No, not at this point. However, a half-apology from Jobs, along with a finding of no harm from Apple’s own investigation (heh, anyone surprised?), carries little merit.
Apple, your credibility is losing its shine.
If it was Gates and he was tarred an feathered it would be well deserved seeing all the stuff he and his company get away with.
man stop reporting this bullcrap,everyone seems to have an agenda.pro or con .opinions are like ……everyone has one .the only problem is writers have a bigger audience.apple is hot right now ,so its jump on the bandwagon to knock them off.this too will pass .
SJ did work at Atari, but that doesn’t mean he was a programmer. Here is an excerpt regarding his days at Atari from “The Little Kingdom” by Michael Moritz, published in 1984:
“Despite his lack of formal electronic training, Jobs quickly bridged the gap between being a technician and being an engineer. one of his early tasks was to add refinements to a game called Touch Me, which sported bulbous rubber suckers. working within the discipline of specified boundaries Jobs tailored the performance of the chips to what was wanted on the screen. He understood the chip’s subtleties, plotted out a new design, and made substantial improvements to the game. Wozniak admired Job’s work. ‘He did creative stuff. He realized how he could build the same thing a lot simpler and better. It was engineering.'”
Also, the story about Jobs and Woz designing Breakout and Jobs cheating Woz out of $5,000+ seems to be a bit of an urban myth. Again from “Little Kingdom”:
“Woziak also helped Jobs after Bushnell decided he wanted a game that would let players destroy a wall of bricks with a bouncing ball. Bushnell offered Jobs a bonus plan, tying payment to the number of chips that were used in the design. With fewer chips, games were not only cheaper to manufacture but also usually more reliable. Jobs recruited help from Wozniak who thought ‘Steve was not quite capable of designing something that comlex.’ The pair spent four consecutive nighs working on the game with Wozniak designing and Jobs wiring the prototype. Bushnell was impressed by the finished game and offered Wozniak a job at Atari anytime he wanted. However, Al Alcorn (Atari’s Chief Engineer), who didn’t discover that Wozniak had been involved until years later, thought, ‘It was a brilliant design but it wasn’t produceable because the technicians couldn’t figure out how to make it work.’ The game was entirely redesigned before it was eventually released as Breakout.
Meanwhile, Jobs, who was anxious to flee to Oregon, discovered that it would take two weeks before he and Wozniak would receive the seven hundred dollars they had been promised. Jobs persisted and was given the cash on the same day and disappeared to Friedland’s farm leaving the straitlaced Wozniak to nurse furtive thoughts.”
This is a fascinating book, and I highly recommend it to anyone interested in Apple’s history. Since it was published only a few months after the debut of the Mac, it goes into much more detail about the very early days than most other books. Also, this is the only authorized Apple book ever written as I understand it.
One interesting thing I just read (I’m about halfway through it) is how Jobs was viewed by Mike Markkula and Woz when they first got going. Markkula was the big shot who made a fortune (a couple million) at Intel, and was effectively their sugar daddy, underwriting a loan for $250,000 to start mass product of the Apple I. They hired a guy named Mike Scott to be president of the company because neither Markkula nor Woz had any faith that SJ would be able to run the business. It’s just funny reading that now, because SJ is worth about 200 times what Markkula was worth then, and he got that rich by running two businesses. The relationship between Jobs and Woz is much different than I thought, and I’ve been surprised by how much doubt Woz had about the whole thing from the start.
“Personally, I’d love to see what the response would be if this statement came from some Wall Street punching bag — say, Microsoft, Home Depot, Hewlett-Packard, or — heavens to Betsy — an oil company. Gates, Ballmer, Nardelli, Hurd, or any oil exec would have been tarred and feathered before morning.”
What a complete load of bullshit.
A statement like this HAS come from Microsoft. They have been convicted of being an illegal monopoly for god’s sake.
Were they ‘tarred and feathered’? certainy not, they were simply told ‘not to do it again’, and let off.
Microsoft has done far more damage to the economy that Apple has ever done.
Steve Jobs is the visionary that turned Apple around. Fred Anderson is the man behind the scenes with all the elbow grease who turned Apple around financially. This is the guy who had to report and take the heat back when Apple was in the red all those quarters.
This CFO is a genius and the results are visible to the world, and if a report to the FED got mishandled or forgotten, then the guy certainly gets a strike on his immaculate record, but he does not get tarred and feathered. Each of us has a skeleton or two in our closet, and we should all be crying instead that this guy is permanantly gone from Apple’s board of directors. This is a major loss. Heck, I have enough trouble as it is reporting everything correctly on my own TurboTax! The name Motley Fool was chosen well for this guy.
Are you kidding me? MS, and specifically BG and SB have literally gotten away with repeated misconduct in the market place, in every major country in the world. Why the sudden need to make SJ pay dearly for his apparent/implied sin. Give me a break
As much as SJ is an amaing businessman, if he knew options back-dating was occuring, then something is indeed rotten at the core. So what else like this happened at Apple? And don’t make the excuse that everybody does it, because not everybody does (take MS and CSCO for example). Fortunately (or maybe unfortuantely), the stock price hasn’t rocked investors, teaching COs and BODs a lesson. For companies like Juniper and Comverse, which have thousands of employee invenstors and even more retail investors, their scandal has only accelerated downward trend in stock price. All for the greed of a few. That first paragraph in the Fool article is dead on. The Money Makers know what’s happening long before things get announced and it is us who hold the bag.
Please keep reporting and analyzing both good and bad Apple news because as the saying goes, “The truth shall set you free.”
A few years ago when Apple was spiralling down and in trouble, there were many things wrong at the company and there simply was not much good news to report at all. When Steve Jobs returned, it was only truthful internal analysis and a revitalized product line that saved the company and allowed Apple to revamp the company from top to bottom by killing poorly-performing products and OS licensing, laying off employees, outsourcing U.S. manufacturing, and weeding out managers who were leading the company in the wrong directions. This must have been difficult, but it was necessary, and only made possible by facing the truth.
The name of your Web site is Mac Daily News, not Mac Daily Good News!
When MDN presents and analyzes bad news (as difficult as it may be), you have more credibility to present and analyze the good news.
“As much as SJ is an amaing businessman, if he knew options back-dating was occuring, then something is indeed rotten at the core.”
Zupchuck, as many have stated here, backdating is not illegal or immoral, as long as it’s done properly. The real question is, did SJ know it wasn’t being done correctly? It sounds like the investigation has decided he did not. How does that make him rotten?
Good on Apple for initiating the investigation.
http://www.thinksecret.com/news/0510investigation.html
“Apple CEO Steve Jobs was found to have been aware that favorable grant dates had been selected in some cases, but Mr. Jobs did not benefit from any of the grants nor was he aware of the accounting implications, Apple said. “
ndelc,
One, I did not say he was rotten. I said IF he knew about it. Still, ignorance isn’t an excuse. Many companies (like Cisco) have a set published date. It’s transparent, and it’s unambiguous. It’s encouraging Apple resolved their issue quickly. Look how it has effected other companies like JNPR, and Comverse.
zupchuck,
I guess we’re just arguing semantics. In your original message, you stated, “if he knew options back-dating was occuring, then something is indeed rotten at the core.”
My point was, there’s no question that he knew options backdating was occurring, and there’s nothing wrong with that. It’s not illegal or immoral. Failing to report it properly can be illegal and immoral if done with the intent to fool investors. I guess what you really meant was, “if he knew it wasn’t being done properly (read: with malfeasance), then something is indeed rotten at the core.” Do we agree?
Regardless, it appears that this was not the case. I’d like to think it wasn’t.
ndelc,
For the most part, we are debating semantics. I understand backdating isn’t illegal, but I’d argue it is immoral since it is using hindsight to create a gain for the option recipients. Even if this is reported correctly, it still costs the stock-holders since it is a charge against earnings. If only we could use backdating to buy APPL stock. And I sure would be happy to report the gain to the IRS!
” width=”19″ height=”19″ alt=”grin” style=”border:0;” />
As lawyers will say, remove even the appearance of impropriety.
I’d sure like to think this wasn’t the case, either.
Oh, and thank you for filling in my missing words, you had the intention correct.
Cheers.