Steve Jobs implicated in Pixar stock option dust-up
The smoldering controversy over the Apple chief's involvement in stock options reignited once again on Friday after curious timing in a Pixar stock option was discovered by the Wall Street Journal.
Quoting an anonymous source, the financial paper placed Apple chief executive Steve Jobs in even deeper hot water than before by suggesting that he had signed a job contract for Pixar's chief creative officer John Lasseter which gave the premier film director a questionable stock option bonus.
The ten-year contract, finalized in March 2001, saw Lasseter granted one million shares whose initial value was dishonestly backdated to a date three months before the deal had been completed -- coincidentally, the same day Pixar shares had been at their nadir in December of 2000. The terms effectively guaranteed that Lasseter would turn an immediate $6.4 million profit the day his new employment took effect, even before he received his first paycheck.
Then the CEO of Pixar, Jobs was known to have helped work out the details of the contract and had to put his signature to the deal for it to take effect, the Journal's informant said. However, doubt exists as to how much conscious involvement the company head truly had in the agreement. While his name on the paper implies tacit endorsement of the dubious grant, Jobs himself may not have actually chosen the date.
Still, an intense level of legal scrutiny is bound to follow the often controversial chief. Both the federal government and Pixar's parent company Disney (on whose board Jobs sits) are said to be actively investigating the studio's handling of stock options. And as always seems to be the case these days, Jobs is under the close watch of the government for irregularities in stocks at his very first company, Apple.
It comes as little surprise that none of the involved parties were prepared to comment to the Journal on the day's news. Disney forwarded requests to speak to Jobs to Apple, which in turn said he was unavailable; a similar response followed in attempts to contact Lasseter. Disney itself chose not to comment on the matter.
Shareholders were suitably unimpressed and thrashed Apple's stock value, which tumbled $2.91 to close at $83.27 by the end of trading on Friday evening.
Quoting an anonymous source, the financial paper placed Apple chief executive Steve Jobs in even deeper hot water than before by suggesting that he had signed a job contract for Pixar's chief creative officer John Lasseter which gave the premier film director a questionable stock option bonus.
The ten-year contract, finalized in March 2001, saw Lasseter granted one million shares whose initial value was dishonestly backdated to a date three months before the deal had been completed -- coincidentally, the same day Pixar shares had been at their nadir in December of 2000. The terms effectively guaranteed that Lasseter would turn an immediate $6.4 million profit the day his new employment took effect, even before he received his first paycheck.
Then the CEO of Pixar, Jobs was known to have helped work out the details of the contract and had to put his signature to the deal for it to take effect, the Journal's informant said. However, doubt exists as to how much conscious involvement the company head truly had in the agreement. While his name on the paper implies tacit endorsement of the dubious grant, Jobs himself may not have actually chosen the date.
Still, an intense level of legal scrutiny is bound to follow the often controversial chief. Both the federal government and Pixar's parent company Disney (on whose board Jobs sits) are said to be actively investigating the studio's handling of stock options. And as always seems to be the case these days, Jobs is under the close watch of the government for irregularities in stocks at his very first company, Apple.
It comes as little surprise that none of the involved parties were prepared to comment to the Journal on the day's news. Disney forwarded requests to speak to Jobs to Apple, which in turn said he was unavailable; a similar response followed in attempts to contact Lasseter. Disney itself chose not to comment on the matter.
Shareholders were suitably unimpressed and thrashed Apple's stock value, which tumbled $2.91 to close at $83.27 by the end of trading on Friday evening.
Comments
Now, someone correct me if I'm wrong, but isn't backdating legal? As long as everyone (the board) agrees to the deal?
Quoting an anonymous source....
"For secrecy sake, we will call him.... 'S. Balmer'..... no no no, that's too obvious...... let's call him..... 'Steve B.' "
"For secrecy sake, we will call him.... 'S. Balmer'..... no no no, that's too obvious...... let's call him..... 'Steve B.' "
Sorry for yelling, but BACKDATING STOCK OPTIONS IS NOT ILLEGAL!
Now, hiding it, misrepresenting it, mis-reporting it, etc, can make for irregular (illegal?) accounting. but the backing of the options themselves is not illegal.
I don't subscribe to the WSJ, so I have not read the whole article; but even if Steve Jobs himself picked the date and signed the contract, that does not automatically mean the he was involved in making the accounting entries (and in all likelihood he was not). And while yes, he's was the man in charge, at some point you need to draw the line between CEO and CFO. I know with Enron and the resulting Sarbaines-Oxley laws that line has shifted to place more responsibility on the CEO to know details about financial transactions, but it is still a very poorly defined line that is drawn.
The financial press, and the press in general, just absolutely is missing the boat on this one. There was a great editorial in the WSJ a few weeks ago that addressed this issue, but the press just loves a great story and whipping people into a frenzy--and grabbing headlines in the meantime. Now tell me who is corrupt? This just has to end. Steve Jobs is not guilty of anything other than maybe getting paid a ton of money. But I would argue he, of all people, would deserve it for the value he has created at Apple. And getting paid a lot is not against the law!
The implication isn't that backdating by itself was wrong, but that the way it was done was wrong.
"whose initial value was dishonestly backdated"
Sorry for yelling, but BACKDATING STOCK OPTIONS IS NOT ILLEGAL!
Now, hiding it, misrepresenting it, mis-reporting it, etc, can make for irregular (illegal?) accounting. but the backing of the options themselves is not illegal.
In reality, with a company as big as Apple, the dilution you experience from an executive option grant is probably not material. Which is another reason why all this is much ado about nothing. I mean, from 1997-2002, Apple recognized $84 million in extra expense? When Apple is making profits in the billions every year, $84 million is small peanuts.
I'm guessing that's why the author put "dishonestly" in front of "backdated," innit?
The implication isn't that backdating by itself was wrong, but that the way it was done was wrong.
Except that the "dishonestly" is likely the author's interpretation of the issue. I'm not sure how the author came to that conclusion. Most of these guys writing this stuff are wrong so that wouldn't surprise me.
Oh yeah, and this is a good time to buy AAPL shares. They will hit 100$ in autumn.
And backdating is _NOT_ illegal, it's what you do to cover it up, whether from not reporting the backdating in the company's SEC filings or from making it look like something else to the market, that gets people in trouble.
In the case of Bonds, the media's pile-on eventually worked on me. I used to be a staunch Bonds defender, now I care very little if he breaks the home run record next year or not, even if he hasn't been charged with any tangible offense as of yet. I pray it doesn't turn out that way for Jobs, but I do anecdotally see the tide of public opinion turning against him.
heh, Steve Jobs salary is 1$
Salary $1 per annum, but income $1 per milli-second
These people don't know what to say to keep AAPL down in Nasdaq.
As a shareholder I admit that all this news about Steve Jobs and potentially "illegal" dealings makes me uneasy. But as for the price of the stock ($83 something as of this weekend) if it makes any sense to you, please explain it to me.
Apple announces record earnings, but predicts a conservative upcoming quarter, announces the iPhone to general applause and good expectations, Mac sales show strong growth in the face of a PC sales slowdown, the iPod continues to reign supreme among portable music players and the stock price is down from before New Year's???????
More recently Cisco announced 41 percent profit increases year over year and made an acquisition of a software company that almost all analysts agree was a good move and the stock price is down????
Stop me when this starts making sense to you.....