Jobs' Unearned Free Ride

Rarely have so many avoidable problems been created by one man's obsession with his own image. Then again, this is Steve Jobs we're talking about.

By Joe Nocera, New York Times

Let's be clear here. I am not saying Steve Jobs committed a crime. What I am saying is that it is pretty obvious by now that Jobs was extremely involved in both of the options grants that have become such problems. The notion that Jobs, a notorious micromanager, would be oblivious while his team worked on these grants is pretty ludicrous..

In late June 2001, Fortune magazine put Steve Jobs on its cover. This, I realize, is not exactly breaking news; over the years, the magazine has put Jobs on its cover with shameless regularity.

This time, though, was different. The headline read "The Great Executive Pay Heist," and Jobs was the cover boy not because he had some slick new product to peddle, but because in January 2000, he had been granted 10 million stock options. Fortune valued the grant, disclosed in Apple's. Latest News about Apple proxy statement of 2001, at US$872 million, making it "by far" the largest option grant ever. (The stock split in June 2000, giving Jobs 20 million options.)

The reason I remember that cover is because I worked on it. As a Fortune editor, I was part of a team putting together a package of articles for that issue about the "highway robbery" -- to use our phrase -- that executive compensation had become. I also recall being quite happy with the cover. What a delicious surprise to discover that Jobs, who had ostentatiously taken only $1 in salary since returning to Apple in 1997, had a stock option package bigger than that of such well-known greedheads as Sanford Weill of Citigroup or Michael Eisner of Disney.

Problems Beget Problems

Jobs, however, was not so happy. He complained about the "unfairness" of the cover and wrote a snarky letter to the editor claiming that, because Apple's stock had fallen by almost $20 a share since the options grant was made, they weren't worth $872 million. "They are worth zero," he said. Of course, that is not how options are valued, but never mind.

What we didn't know at the time -- what nobody knew except the Apple board and a handful of executives -- was that the article so infuriated Jobs that he began agitating to have the options package canceled. The options were so far underwater -- and he had so little faith that they would ever be "in the money" -- that he felt it wasn't worth the bad press to hold onto them.

Did that mean that Jobs was willing to go back to his $1 a year salary? Hardly. So at the same time, he and the board began negotiating a new package -- 7.5 million stock options this time, at a price of $17.83. Those options were agreed to by the board in late August 2001 -- barely two months after the Fortune cover story -- but the final negotiations with Jobs weren't completed until mid-December.

Though those options also never paid off for him, as the stock continued to sink, they have had enormous consequences: They helped embroil Apple and its iconic chief executive in the options backdating scandal. Among other things, an Apple lawyer created fictitious board minutes; two of Jobs' closest associates were forced out of the company and faced charges brought by the U.S. Securities and Exchange Commission; and Jobs' own actions and ethics have been brought into question.

Rarely have so many avoidable problems been created by one man's obsession with his own image. Then again, this is Steve Jobs we're talking about.

http://www.macnewsworld.com/story/mydkP59bXfMA4A/Steve-Jobs-Unearned-Free-Ride.xhtml