February 1, 2007 12:26 PM PST

Why Apple's board is standing by Jobs

For the hundreds of companies accused of inappropriately backdating stock options, there's no pat answer for what to do.

Some, like security software maker McAfee, have asked their CEO and other top executives to step down, even without acknowledgement of wrongdoing or of executives benefiting financially from the backdating. Others, like Apple, have taken the opposite approach, defending the actions of their CEO, Steve Jobs, and taking a wait-and-see approach to federal investigations.

Is one approach right and the other wrong? 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. But a realist would say some CEOs have been unfairly booted with a career-damaging footnote to their resumes and that the public doesn't know the details of what's really going on inside a company and shouldn't try to judge.

"As you would expect, boards have different tests for this kind of stuff."
--David Larcker, accounting professor, Stanford University

Even the Securities and Exchange Commission hasn't figured out the proper penalty for companies and executives embroiled in the scandal, according to recent reports. Some executives may have known they were doing something illegal, some might have known it was a murky area, and still others might have had no idea of the accounting mess they were in store for later on.

A realist would also say it's foolish to kill the golden goose unless it's absolutely necessary. At Apple, the golden goose is Jobs, and it is, of course, a board's duty to act on behalf of shareholders.

"Steve Jobs is so closely tied to the success formula of Apple that nobody is going to believe nearly as much in the future of that company the day he walks out the door," said Stephen Mader, vice chairman of executive search firm Christian and Timbers.

Federal investigators are looking into Apple's practice of backdating stock option awards. Hundreds of companies--including CNET Networks--have become embroiled in the problem, in which companies preparing stock option awards occasionally cherry-pick a grant date when the stock price was low, rather than using the price on the date the options were actually awarded.

Technically, backdating is legal (though certainly controversial) if properly accounted for and disclosed, Mader said. Apple has revealed that Jobs was aware that favorable grant dates were being selected, and personally approved some of the dates. However, an investigation conducted by the board of directors and outside counsel found that Jobs did not profit from the backdating and was unaware of the accounting implications, Apple said in announcing the results of its internal inquiry.

Apple has also admitted that someone invented minutes for a meeting that never took place--the one in which Jobs' grants were supposedly approved. The company has said it found no evidence that current members of the company's management team were aware of the fictitious meeting, but the incident clearly occurred on Jobs' watch, as he said when announcing the resignation of former Chief Financial Officer Fred Anderson from Apple's board of directors. An Apple representative declined to comment beyond the public statements about its internal investigation.

In the case of McAfee, Chairman and CEO George Samenuk was said to have "retired" in the company's press release announcing his departure, while President Kevin Weiss was "terminated." Samenuk made a statement that didn't touch on his involvement in McAfee's backdating, but included this line: "I regret that some of the stock option problems identified by the Special Committee occurred on my watch."

See more CNET content tagged:
stock option, Steve Jobs, accounting, Apple Computer, CEO


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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
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
He incorporates fun, and art, into his work...

1) Apple Mac/OS best user-computer experience & idea has
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.

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.

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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