February 1, 2007 12:26 PM PST

Why Apple's board is standing by Jobs

(continued from previous page)

So why does Jobs get a pass when other have gotten the boot? Of course, it's difficult to say what exactly each board knows beyond its public statements. But experts say a high-flying company like Apple would likely suffer more pain from the departure of its iconic CEO than it would if the board continued to defend Jobs--as long as no criminal charges are filed as a result of the investigations.

"When the stock price is going down, the improprieties seem to be a bigger deal than when the stock price is going up," said David Larcker, a professor of accounting at Stanford University and director of the university's Corporate Governance Research Program.

Apple is certainly on a roll. The company's stock is up 14 percent over the last 52 weeks, after several quarters in which it has exceeded Wall Street's financial expectations with strong iPod and Mac shipments. And it's got analysts buzzing about the potential for a product--the iPhone--that isn't expected to ship until June.

Also, there's no formal standard for board members to follow in this situation. "As you would expect, boards have different tests for this kind of stuff," Larcker said. "If a company is having a lot of trouble, and something happens, it seems to me they are much quicker to pull the plug on the CEO."

No doubt, Apple has talented designers, technical wizards and savvy marketers on its payroll. But perhaps more than in any other company in technology, Jobs gets more credit for Apple's successes than other CEOs, based on his track record, demanding management style and the famous reality distortion field--the mix of charm, charisma and marketing Jobs uses to get projects done.

As a result, Jobs is perhaps Apple's greatest asset.

For a company its size, Apple has a relatively small, seven-member board. Besides Jobs, it's a who's who of San Francisco Bay Area business, including Arthur Levinson, CEO of Genentech; Intuit Chairman Bill Campbell; Google CEO Eric Schmidt; former Gap CEO Millard Drexler; and Jerry York, the former CFO of IBM who is now the head of the venture capital firm Harwinton Capital.

But the best-known member of the board is documentary maker, Internet entrepreneur and former Vice President Al Gore. He has taken a prominent role in the backdating investigation, as co-leader of the investigation with York. Given that Gore likely continues to harbor political ambitions, his public stance on this issue suggests he had the full backing of Apple's board, said Patrick McGurn of Institutional Shareholder Services, a proxy firm.

Said Stanford's Larcker, "Ultimately, the professionalism of the directors has to come into play. If you're a board member, what is it you view as totally out of bounds?"

Boards also need to consider public opinion when making these types of decisions, and it would be hard to find an Apple customer or shareholder who thinks the board should take a tougher stand with Jobs. "It's fine for boards to say, 'It would be a bad thing for shareholders (to remove a CEO), and we're going to fight this thing until it's a criminal issue of major proportions.' There are other times when its more inconvenient to fight the PR battle," Mader said.

Of course, Apple's devoted fans are unlikely to care about what Jobs may or may not have done. Financial analysts have been quick to seize upon the results of Apple's internal investigation exonerating Jobs, and investors know how important Jobs is to Apple.

"They (the board) may be as likely to get sued if they removed Jobs at this time than if they didn't," McGurn noted.

It's no surprise, then, that there appears to be little pressure on Apple's board to take any action.

"Unless the evidence it found was absolutely black and white that he had committed some sort of fraudulent act, then the chances would be good the board would give him a pass," McGurn said. "Then they would cross their fingers that the regulators would come to the same decision."

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21 comments

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No Ethics and no Shame.
What has happened is disgraceful. Jobs stole from Apple. Then Apple's Board backs up Jobs with fabricated paperwork. These people are thieves. The fact is that everyone else is **** scared of Jobs at Apple. And whilst the shareprice is riding high the Shareholders will turn a blind eye.
Also today is a bad time to work for one of these giants. They chew you up and spit you out when you cost too much. Then they send your job to India or China.
BTW Apple makes no hardware fullstop. They just subcontract it out to Foxconn or Flextronics etc.
US style capitalism is like a Pyramid. Unless you are at the top you get nothing, whilst people like Jobs get Billions and then steal to get even more.
Posted by Jamie_Foster (77 comments )
Reply Link Flag
Accountability
So, how exactly did Steve Jobs steal from Apple? He made a lot of share holders much richer than they would have been otherwise, himself not included in that mix. Again, this is not a "criminal act" until someone inside gains, like Jobs, or someone looses, like the share holders. Jobs didn't gain, and in the end, the share holders won. Even if someone lost in this, its still not illegal, just un-ethical. It is also un-ethical to flame a large crowd of people (big business) in a public area. Perhaps you should be investigated and prosecuted for your immoral actions... **raises eyebrow**
Posted by ServerMonkey+FarmBoy (29 comments )
Link Flag
Apple makes no hardware?
Your ******** goes overboard with this statement: do you really
believe that those guys in China would be churning Macintoshes
and iPods without Apple? Are you fooling yourself? Or maybe you
don't really get what that means to "make hardware"!?....
Posted by lixpaulian (106 comments )
Link Flag
Right thing by shareholders???
I find this statement "A stickler for corporate governance would
say McAfee and other companies, including CNET Networks
(publisher of News.com), have done the right thing by
shareholders." illustrative. If I've read the news correctly the
financial impact on shareholders of these actions was about $84
million as that was the accounting adjustment taken. Compare
this to value added to shareholders pockets during Job's return.
Then compare this to the robber baron CEO's getting their $100
million+ golden parachutes after being dismissed for driving
their company into, or at least toward, the ground. I would
argue this is often why other boards have asked top
management to stand down after something like a backdating
faux-pas, not to be proper corporate governance. Note, I'm not
talking about behavious that has been proven to be criminal.
corporate governance is about protecting shareholder value
because they are not directly represented.
Posted by dscottbuch (14 comments )
Reply Link Flag
Stop the inquisition
It seems like someone at CNET doesn't like Jobs or Apple very much, to post an attack article like this.

The guy saved a dying company and has been instrumental in revitalizing it as premier hardware and electronics company. If the rules aren't clear about what happened, then no guilt may be assigned in the case.

I suggest that CNET focus more attention and energy on issue of greater importance and clarity.
Posted by bob donut (90 comments )
Reply Link Flag
Why is every article about Apple...
Seen as an attack article, it is news if you fanboys would quit whining about CNet reporting news about your beloved Steve Jobs, and understand that he is an unethical CEO who is to blame and Apple keeps covering him up and they are at fault. You guys don't see MS fans crying at every article about MS or Gates and say it is bias or hate from CNet. Grow up and understand that your religion isn't all you make it out to be.
Posted by afriendof77 (21 comments )
Link Flag
Not again!
Look, if backdating stock options were illegal, Jobs would be
awaiting his day in court. As it is no one has charged him with
anything. No one is denying what happened.

From what I understand they had a board meeting scheduled.
Stock options were going to be granted at that board meeting.
The meeting didn't take place as scheduled, so they dated the
option to the original meeting date. So what?

This is not a big story, but count on CNET and others to get all
the page views they can out of it.
Posted by sbwinn (216 comments )
Reply Link Flag
Thank you all
"This is not a big story, but count on CNET and others to get all the page views they can out of it," one person has posted.

And thanks for giving it to them, I say. If you want to make a statement to a company, you make it with your wallet. You're complaining about the story, but taking the time to post a heated reply. And thus giving CNET another reason to post another one like it to get more cash and post more stories like this. All of you are smart enough to know that.

Honestly, I don't know if the story is a false accusation or not. I don't really care. But, I also have the feeling that most of you are just enjoying the charity of defending a corporation (Apple) and/or person (Jobs) who really couldn't care less if you defended them or not.
Posted by toosday (343 comments )
Reply Link Flag
capital clue
In a capital market, shareholders of public companies have established rights and expectations. Apple is a public company. Jobs trangresson on them and should without a doubt fry. Like Martha Stewart for instance for much less. But, in defending Jobs, the directors know that without Jobs, Apple will simply rot away. The droids at MacAfee are simply slacker MBAs that got their hands into the cookie jar. They couldn't innovate, or create or visionize(??) their way out of a wet paper bag. Any other management droid ( or a handlful of monkeys even ) could take their places and McAfee would still be McAfee. But Jobs is the heart and soul, the entrepreneurial reason for Apple's existence. The directors know that. Too bad that however, that same existence of Apple relies on the American capital markets. No stock market = no investment = no options = no Apple. It's a tough call. On the other hand, 95 percent of the world wont miss Apple's existence so, fry away.
Posted by gggg sssss (2285 comments )
Reply Link Flag
Martha Stewart?
Martha Stewart's actions, trading on insider information, is
against the law, plain and simple.

Backdating options is something a lot of companies have done.
Not explicitly against the law, but unethical.

The ones who are hurt by these practices with options are
shareholders. It is highly, highly unlikely that more than a tiny
fraction of Apple's shareholders believe that removing Jobs
would be good for their interests. So, the key is that in this case
protecting shareholders interests means keeping Jobs in place.

Jobs still takes only $1 in salary. It would be better just to pay
him what he is worth in salary than having to find these
"creative" ways to give him his due compensation for turning
Apple around.
Posted by Thrudheim (306 comments )
Link Flag
Does it really need explaination? Isn't it obvious?
He's a genius, innovator, designer, marketer with a golden
touch.
He incorporates fun, and art, into his work...

1) Apple Mac/OS best user-computer experience & idea has
won.
2) iPod and iTunes proved legal downloading works. And, has
changed that entire industry, and next, Hollywood
3) iPhone
4) He brought Pixar to fruition with several blockbusters, sold it
for Billions
5) He is the largest shareholder in Disney

Why WOULDN'T they want him?!?
Posted by technewsjunkie (1265 comments )
Reply Link Flag
Jobs is GOD!!!
He does what no other CEO can do. Lead a company that
focuses on making great products over making great profits.
Funny thing is, he's smart enough to know that making great
products ensures great profits.

Microtrash on the other hand plays the me-too game. Always
waiting to see what the market wants, then delivering. Apple/
Jobs is smart enough to know what the consumer WILL want.

Live the dream. Live Apple!!!!
Posted by Dr Dude (49 comments )
Reply Link Flag
Job is Computer King!
I agree with Dr. Dude to a point. Jobs is NOT God, but he is KING!
Apple has always been a strong product/company and Steve Jobs is
the embodiment of Apple. Just as Martha Stewart is the Domestic
Diva, Jobs is the Computer King.. Long live Apple. They make great
stuff that everyday people can use.

Microwho?
Posted by MadamM (1 comment )
Link Flag
a theft steals, a liar tells lies
that, is what this guy is all about.
plus, cheap attacks for a sour revenage......pathetic.
Posted by eprepr (9 comments )
Reply Link Flag
Keep on firing `em!
Then maybe some of us who were sidelined can get a cushy gig to ride out until it's retirement age.
Posted by Too Old For IT (351 comments )
Reply Link Flag
Jobs is a Liar
What a complete liar! And the board at Apple are all crooks. They all worship Jobs and his greasy hair.
Posted by iZune (58 comments )
Reply Link Flag
if apple were strong... it wouldnt need jobs
the people on top of the food chain must doubt the underlings... or maybe they just dont want to let down all those fan boys
Posted by wone123 (32 comments )
Reply Link Flag
jobs is wimp to hide behind apple
he should amend his mistakes more fully and move on to new things.. cheifly, disney
Posted by wone123 (32 comments )
Reply Link Flag
Late But Read
Anyone who thinks Jobs is bad for Apple is such a detriment to the
human gene pool they should be taken out back and shot.

eom.
Posted by Thomas, David (1947 comments )
Reply Link Flag
Eric Schmidt is the biggest Mafia puppet in the US. He is bad news for apple users. http://endmafia.com
Posted by geo11101 (76 comments )
Reply Link Flag
 

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