WSJ: Steve Jobs, backdating miscreant

“The markets have finally had their say about the wonderfully overblown backdating scandal. When Apple filed its latest mea culpa on Friday along with a board expression of confidence in Steve Jobs’s leadership, the company’s shares jumped four bucks. Message: The market doesn’t give a hoot about backdating. It gives a hoot whether Mr. Jobs might be run out of his job,” Holman W. Jenkins, Jr. writes for The Wall Street Journal.

Jenkins, Jr. writes, “This ought to cast a light on whether the drop in market prices of companies in the backdating scandal reflects the shock and horror of investors at the details of backdating — or shock and horror at the meal that trial lawyers, prosecutors and the media are making of companies caught up in this episode.”

Jenkins, Jr. writes, “Backdating, let’s recall, was simply an artifice to allow companies to issue ‘in the money’ options (the terms of which were accurately reported to shareholders) without taking an accounting expense. That’s all backdating is. Does it matter in the teensiest whether options are expensed? No, expensing has no probative value whatsoever for evaluating a company’s shares or its compensation policies. Expensing creates a junk number, of zero analytical value.”

Full article “A Typical Miscreant-II” (subscription required) here.

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Should Steve Jobs be allowed to survive Apple’s options backdating scandal? – January 02, 2007
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ThinkEquity analyst: Apple sell-off due to ‘inexperienced traders,’ nothing new in options story – December 28, 2006
Analyst: U.S. Gov’t unlikely to ‘nail Apple and Steve Jobs’ – December 28, 2006
Report: Apple ‘falsified’ records on 7.5m stock options granted to CEO Steve Jobs in 2001 – December 28, 2006
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Piper Jaffray: Steve Jobs not at risk in stock options case – December 27, 2006
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  1. With shares dropping again today, one wonders what fools are selling AAPL. No, I suppose one doesn’t wonder. Are there analysts recommending Sell? Seems like the buying opportunity continues. This backdating issue just doesn’t bother most people who know Apple. Whether SJ stays or goes does.

  2. Why does the WSJ have such a hard on for Steve Jobs ??

    Look at the news today….a really bad CEO (Home Depot’s Nardelli)is forced out for poor performance with a $200+ million severence payment and they don’t say boo.

    Isn’t obscene CEO comp the real issue here ?

    And isn’t it the absurd employment contracts the topic that should be openly analyzed ?

    The options backdating is becoming a witchhunt now.

  3. It seems that people are commenting without reading the original article (which was actually an editorial).

    The Journal doe not “have a hard on for Steve Jobs”, and the editorial did not say anything bad about Steve or Apple. It was pointing out how irrelevant the backdating issue is, and more importantly, how it is being driven by a media that gets attention by writing stories that cater to the general population’s resentment of highly paid corporate execs.

    They writiers go out of their way to point out how absurd it is that Steve Jobs would do something illegal to enrich himself by a small percentage of his actual net worth. They also mention how the shareholders value him (and other execs) by the impact these matters have on stock price.

  4. That Nardelli was booted out shows that General Electric was right when he was denied the number one spot. That he can walk away with such a golden parachute says Home Depot was derelict not only in selecting him, but in giving him such a sweetheart deal.

    As to the options backdating, Jenkins is wrong when he says it has “no probitive value”. Since it is “free money”, it should be expensed in the year it is offered. It also says the Directors are failing in their fiduciary duty to stockholders and should be held liable.

    Finally, it’s now clear options backdating had become common practice in recent years, that perhaps a third of Fortune 500 companies may have engaged in one or more variants of backdating. (It’s now harder to pull off due to the reporting requirements of Sarbanes/Oxley.) That Apple is a common reference point reflects a cultural desire among the chattering class to bring down someone more successful than they.

  5. Jenkins apparently doesn’t understand much about expenses.

    Companies provide stock options for two reasons: so that employees can share in company growth, and (this is the key one for us here) to allow them to offer lower salaries than they otherwise would. In other words, deflate their employment expense which in turn increases their profit and allows them to create a falsely inflated profit picture.

    To anybody who says options are worthless and don’t need to be expensed: since they’re worthless, you obviously wouldn’t have any trouble giving them to me.

  6. “The clock is ticking down to a Steve Jobs exit from Cupertino and all things Apple.”

    This clock is also ticking down on the Sun.

    This sort of universally applicable statement is meaningless.

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