Steve Jobs in regulators' sights

Disclosure. I just sold all my Apple stock, before writing this post. (The stock is soaring, but I can't believe traders have properly digested the news.) Steve Jobs, the company's hugely valuable chief executive, must now be squarely in the sights of securities regulators. Fred Anderson, the company's former chief financial officer, has turned on his former boss in order to save his own skin. It emerged this morning that he'd done a deal with the Securities and Exchange Commission, disgorging just $3.5m of his personal gain from Apple's sleazy stock option program. If that was it, Apple would be home free. But, in a statement just released, Anderson says Jobs ignored his warnings about fixing the date on executive options, a technique which built in profit for executives from the get-go; and accuses the Apple chief executive of misleading him about the necessity for board approval of the grants. The key passage, below. More, much more, later. But, now, hurry.

Fred was told by Steve Jobs in late January 2001 that Mr. Jobs had the agreement of the Board of Directors for the Executive Team grant on January 2, 2001. At the time Mr. Jobs provided Fred this assurance, Fred cautioned Mr. Jobs that the Executive Team grant would have to be priced based on the date of the actual Board agreement or there could be an accounting charge. He further advised Mr. Jobs that the Board would have to confirm its prior approval in a legally satisfactory method. He was told by Mr. Jobs that the Board had given its prior approval and the Board would verify it. Fred relied on these statements by Mr. Jobs and from them concluded the grant was being properly handled.


Fred understood that, under Apple's stock option plan and accounting rules at the time, a grant date could be moved to a later date than the date of the actual grant decision and that there would be no compensation expense as long as the stock price on the new date was higher than the price on the original date. Apple's 1998 Executive Officer Stock Option Plan provided in Section 16 that 'The date of grant of an Option...shall be, for all purposes, the date on which the Administrator (in this case the Board) makes the determination granting such Option...or such later date as is determined by the Administrator '. Mr. Anderson understood that the date of grant was to be moved forward pursuant to this provision from January 2 to January 17 to avoid any appearance of impropriety that might arise from a grant awarded just prior to the stock price rise that resulted from the 2001 MacWorld exhibition and Mr. Job's keynote speech at the exhibition on January 9. He further understood that the January 17 date was selected by Mr. Jobs and Ms. Nancy Heinen, the former General Counsel, and that the stock price on January 17 was higher than the price on January 2.

Finally, Mr. Anderson understood that the Board of Directors, which consisted of sophisticated corporate executives of national stature, including the former Chief Financial Officer of IBM, verified the January 17 date by signing in early February 2001 a Unanimous Written Consent (UWC) with an effective date of January 17. It now appears the Board may not have given the necessary prior approval to the grants, contrary to what Mr. Anderson understood from Mr. Jobs and from the Board's signing of the UWC with an effective date of January 17.

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