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Jobs: Stock grant was motivated by need for respect

updated 05:00 pm EDT, Thu April 23, 2009

Jobs on backdating scandal

The backdating scandal which threatened Apple from 2006 through to 2008 had its origins in a perceived lack of respect, claims Apple CEO Steve Jobs. Testimony from a March 2008 SEC deposition, obtained through the Freedom of Information Act, reveals that according to the executive, he approached the board of directors in 2001 about a stock option grant. "It wasn't so much about the money," Jobs comments in his statement. "Everybody likes to be recognized by his peers...I felt that the board wasn't really doing the same with me."

Elaborating, Jobs observes that his previous stock options essentially vanished with the evaporation of the dotcom bubble. "I just felt like there is nobody looking out for me here, you know," he tells the SEC. "So I wanted them to do something, and so we talked about it...I thought I was doing a pretty good job."

Jobs further adds that he had been hoping to receive recognition, such as a grant, "without me having to suggest anything or be involved in anything or negotiate anything...It would have made me feel better at the time."

Trouble may have begun with a meeting in August of 2001, when the board approved an option for 7.5 million shares. Jobs continued to argue over whether the options should be vested immediately or over a staggered schedule however, and this is allegedly what caused the company to miss filing notifications with the SEC and internal Apple auditors. Terms were finally sealed on December 18th, but backdated to October 19th, temporarily granting Jobs an extra $20 million. The options were later substituted for stock of lower value.

The SEC accuses parties of later doctoring August meeting notes to say no grant had been authorized, and then inventing a bogus October 19th meeting in which the grant actually was awarded. Jobs insists that he had no involvement in the fake documents, which mostly bore the name of former general counsel Nancy Heinen. The October 19th meeting did not even register until the scandal became public, he claims.

Quotes from the deposition additionally suggest that grants to other executives in 2001 were used to fight off job poaching. "I was very concerned because Michael Dell, one of our chief competitors, had flown Fred Anderson, our CFO, down to Austin...to try and recruit him," says Jobs. Both Anderson and Heinen were eventually sued by the SEC over backdating concerns in 2007, settling out of court.

Jobs admits to the existence of e-mail sent by Heinen on February 1st 2001, reading "Steve agreed to go with Jan. 17;" the backdating implied by the message produced $20 million for Apple executives. Options were originally going to be granted in early January, says Jobs, but it was thought that increased trading because of Macworld would make the timing suspicious. The 17th may have been chosen in backdating because it was closer to the pre-Macworld price, he surmises.




by MacNN Staff

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Comments

  1. code4fun

    Joined: Dec 1969

    +5

    nothing wrong with that

    I have no problem as a shareholder rewarding top brass and employees when they perform. On the other hand, we have a lot of companies on Wall Street who are in trouble that they throw elaborate parties and excess bonus. That's not right. Go Apple!

  1. starwarrior

    Joined: Dec 1969

    +1

    Knows GAAP accounting now

    I wonder is this introduction to GAAP accounting rules led to the iPhone rules which are making smoothed quarterly money for us all. Masters of the realm learn and apply from all directions.

  1. testudo

    Joined: Dec 1969

    -5

    Love it

    Of course, maybe if jobs didn't dump all the apple stock he received when he re- joined the company,he wouldn't have been whining about his options becoming worthless.

    And, in hindsight, maybe they should have let the CFO go to dell, if he felt back-dating was ok, who knows where dell would be now.

  1. testudo

    Joined: Dec 1969

    +1

    Re: knows GAAP

    I don't think they introduced new GAAP rules. Apple is supposedly following the rules laid out by sarbanes/oxley about how to account for certain types of products. This is also why they charge iPod users for updates to the iPod, because they don't subscribe those profits.

    It is thought that the reason they subscribe the iPhone is because it allows them to more easily update its capabilities without having to charge for it (like they do with the iPod Touch - which they don't subscribe, probably because they don't want to subscribe iPod sales, as it would cause their earnings to plummet quarter to quarter for a while).

    Another reason may be due to the original ATT contract, which paid Apple part of the contract fee each month (rather than the usual up-front subsidy). That may have required them to subscribe it as well.

    And just to finalize the thought, I believe the AppleTV is the only other product Apple accounts for subscribed. But its revenues are so small it wouldn't affect a quarterly statement much if it weren't, so it just makes it easier for Apple to upgrade it as they update their Video store capabilities.

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