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Steve Jobs' Unearned Free Ride
Joe Nocera of the New York Times reveals further details about the Apple options scandal and poses the $872,000,000 question.
'Let's be clear here. I am not saying Steve Jobs committed a crime. What I am saying is that it is pretty obvious by now that Jobs was extremely involved in both of the options grants that have become such problems. The notion that Jobs, a notorious micromanager, would be oblivious while his team worked on these grants is pretty ludicrous.'
So begins Joe Nocera's New York Times article on Steve Jobs and the Apple backdating scandal.
'In late June 2001 Fortune magazine put Steve Jobs on its cover. The headline read 'The Great Executive Pay Heist' and Jobs was the cover boy not because he had some slick new product to peddle but because in January 2000 he had been granted 10 million stock options', begins the narrative.
Fortune valued the grant at $872 million - by far the biggest option grant ever. And Nocera remembers that issue because he worked on it.
'As a Fortune editor I was part of a team putting together a package of articles for that issue about the highway robbery - to use our phrase - that executive compensation had become.'
'I also recall being quite happy with the cover. What a delicious surprise to discover that Jobs, who had ostentatiously taken only $1 in salary since returning to Apple in 1997, had a stock option package bigger than that of such well known greedheads as Sanford Weill of Citigroup or Michael Eisner of Disney.'
But Steve Jobs didn't find the surprise delicious. Jobs wrote a 'snarky' letter to the editor claiming that since Apple stock had fallen almost $20 his 'gift' was worth 'zero'.
But what Nocera and Fortune didn't know at the time - what no one knew except a handful of people in Cupertino - was that Steve Jobs was so furious he started trying to have his options package canceled.
'The options were so far underwater - and he had so little faith they would ever be in the money - that he felt it wasn't worth the bad press to hold onto them.'
Image Conscious Steve
'Did that mean that Jobs was willing to go back to his $1 a year salary? Hardly. So at the same time, he and the board began negotiating a new package - 7.5 million stock options this time at a price of $17.83. Those options were agreed to by the board in late August 2001 - barely two months after the Fortune cover story - but the final negotiations with Jobs weren't completed until mid-December.'
By that time one Apple lawyer had been called on to create fictitious minutes of a board meeting that never took place and two of Jobs' closest associates were compromised and later forced out of the company to face charges by the SEC.
'Rarely have so many avoidable problems been created by one man's obsession with his own image. Then again, this is Steve Jobs we're talking about.'
But this week Apple stock hit $100 for the first time in Apple corporate history; former Apple CFO Fred Anderson got to walk; and formal charges were brought against former NeXT and Apple general counsel Nancy Heinen who has consistently protested her innocence.
What Nocera is asking is what a lot of people are asking: what are the rules in this the most exclusive of clubs? Why is Steve Jobs ostensibly being given a free ride? Have Fred and Nancy had an agreement with Steve to keep silent? And now that Fred's off the hook he's pointing the finger right back anyhow - he's now claiming he protested against Steve's initiative to backdate the options and Nocera believes Fred's miffed because Jobs double-crossed him and used him as a scapegoat.
'You hear from lots of market-savvy people that it would be terrible for investors if Jobs were forced out at Apple because of the options backdating scandal. How, they say, will that help Apple shareholders? However, lots of other CEOs have lost their jobs because of options backdating, and several have even been indicted', Nocera reminds his readers.
'However indispensable he may be, there is something terribly corrosive about the notion that Jobs can't be touched because, well, he's Steve Jobs.'