Did Steve Jobs ‘financially benefit’ from backdated options?

“You’ll recall that in late December, when a special committee of independent Apple directors exonerated CEO Steve Jobs of any wrongdoing in connection with the options backdating that it admitted had occurred at that company, it stressed, among other things, that Jobs had not ‘financially benefited’ from any of the backdating,” Roger Parloff blogs for Fortune.

ParloffOthers have already questioned the special committee’s interpretation of financial benefit (see, e.g., this Washington Post article, focusing on the fact that the options were later exchanged for 5 million shares of restricted stock), and I have previously argued (here) that whether someone ultimately succeeded in realizing a financial benefit is irrelevant to the question of whether he attempted or conspired to violate various securities, tax, or accounting laws or rules.”

Parloff writes, “But there’s a simpler reason, still, that, I think, Jobs did “financially benefit” from some of the backdating at Apple. It stems from a very unusual fact about Jobs’s two enormous options grants, which I only stumbled on recently when re-reading some of his SEC filings: large portions of each grant vested immediately.”

Full article here.

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28 Comments

  1. Makes sense to me. So, all you financial pages folks, how much would it matter it he did financially gain?

    What odds are ya’ll laying for:
    Apple is smacked on the wrist.
    Jobs is smacked on the wrist.
    Apple is whacked.
    Jobs is whacked.
    Jobs is forced out.

  2. Whether SJ “benefited” or not is only tangentially related to the question of criminality. Jobs has stated that he didn’t know the accounting implications, which would mean that there was no criminal intent (which is necessary in this type of charge). Whether he benefited is mainly a PR issue, though the prosecutors could also require that he return the money to avoid prosecution if he is determined to have benefited.

  3. My understanding is that backdating is not illegal; not reporting it correctly (I guess to the SEC) is the problem. And of course the root question here is whether the shareholders were hurt. Of COURSE the recipient of the backdated stock is going to benefit financially — that’s the point of the stock grant in the first place. You don’t give someone a stock benefit, backdated or not, to punish them. The real core issue here is the fact that the stock has risen 1700% on Mr. Jobs’ watch… which makes this entire ridiculous “scandal” pretty much a witch hunt.

  4. Hmmmm. If he did not exercise the options for gain, then he did not benefit. Period. Anything else is politically motivated.

    The exchange of options for stock can be evaluated as proper or not, but that was not part of the original issue.

    JMHO.

    N.

  5. @Jake,

    “Jobs has stated that he didn’t know the accounting implications, which would mean that there was no criminal intent (which is necessary in this type of charge).”

    I think this is very important here. The thing to remember about SJ is that, unlike many CEOs, he doesn’t have a background in accounting, etc. Remember, he has had ONE semester of college! I doubt that SJ knows all of the specific details regarding the handling of stock options. That’s why he hired Fred Anderson. Some CEOs are very hands on in the accounting practices of the company because they come from that background. I sincerely doubt that SJ is like that.

  6. Jake
    I would love for Jobs to weather this nonsense unmarred, but your assumpition that “Jobs has stated that he didn’t know the accounting implications….” implies that he is a man beyond reproach – what would you say in his sneakers if you had known – sure judge I knew…put me away. I don’t know him personally but I have seen people that I thought I knew lie under oath and that was very uncomfortable. As someone an avid Apple fan and one who thinks of Jobs as a modern day Edison I wish him well , but I don’t give Jobs or any othe mortal for that matter a demi-god or god-like qualities.
    Let’s hope for the best.

  7. Someone else besides me must have read the article a week or so back that discussed how Jobs options were worth circa $800m after they were rearranged and if they hadn’t been they would have been worth more than 2.5 billion. The writer said Jobs offerd to sell him his options…

    I can’t find the article….

  8. norm e has it exactly right.

    Also the author if the article linked to by Macaday has done a bit of revisionist history. Jobs’ offer was for much, much less than half of the author claimed the value was.

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