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Comment by tpmx | Hacker News Reader

This ($600k) is peanuts.

2008: How Jobs dodged the stock option backdating bullet

https://www.cnet.com/culture/how-jobs-dodged-the-stock-optio...

tl;dr:

> In the case of Apple, not only did the board send two sacrificial lambs to slaughter, but the feds hung some pretty hefty charges on their necks to boot. The lambs in question are former Sr. VP, General Counsel, and Secretary Nancy Heinen [settled with the SEC for $2.2 million], and former CFO and director Fred D. Anderson [settled with the SEC for $3.5 million].

> The SEC's complaint focuses on the backdating of two large option grants, one of 4.8 million shares for Apple's executive team and the other of 7.5 million shares for Steve Jobs.

...

> At the end of the day, Jobs dodged a bullet because of 1) his value to Apple's shareholders, 2) his value to the U.S. economy, and 3) just plain luck that neither Apple's board nor the SEC found a smoking gun to force them to do something they didn't want to do.

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I will not claim to know the details of this particular story. But I do want to point out that, when I joined Apple, stock options were part of their bonuses. We were told whether or not we would get stock options, and when, during our annual one-one meetings with our managers. These meetings were held across the company over a period of a few weeks. We were told that the price of the option would be the minimum price over some period of days up to the time the board approved the employee options for everyone who was given them. So if employee a was told their award at the beginning of the month, and employee b told three weeks later, they would be given the option at the same price. This applied in my case, and seemed completely fair to me. I was a lowly engineer with no special value to the US economy, the shareholders etc. It was a sensible and rational way to award stock options. Apple switched to a new scheme, probably to avoid the appearance of something untoward, namely RSU: actual stock awards rather than options, but with restrictions on when we got them.

Backdated stock options is just not comparable to insider trading.

In the above case of stock option backdating:

https://www.cultofmac.com/443542/steve-jobs-apple-stock-back...

> According to Forbes, which broke the Apple stock-backdating story, Jobs’ award of 7.5 million shares got approved at a board meeting on August 29, 2001. At that point, Apple’s share price was $17.83. However, Jobs continued to argue over the point at which the options would vest. That resulted in Apple missing the deadlines for filing the proper information with the Securities and Exchange Commission and its auditors.

> It took until December for the parties to agree upon terms. At that point, Apple’s stock price stood at $21.01. Backdating gave Jobs a lower share price that, on paper, made him $20 million richer.

Morally speaking I find this comparable to insider trading. At the time Apple was worth approximately 300x less than it is now, so the $20 million damage to the shareholders back then would correspond to about $6 billion today.

Steve Jobs lived his life to break rules in front of others for a show of animal dominance. A guy who parked his 12 cylinder ultra-luxury sedan in the Handicapped parking spot repeatedly, daily. Its not just "FU handicapped", its FU handicapped and if you say anything to me, now or later, you are fired. He was famous for firing a nervous nerd during an elevator ride who couldn't justify his job on the spot. The stories are endless. There was no one like Steve Jobs and that is true.

Breaking rules in front of others and the examples you give are not comparable to a show of animal dominance. It's a show of power within a corporate environment that has the opposite effect and only shows weakness. If Steve Jobs thought he was expressing animal dominance through those instances he clearly would have misunderstood the concept.

The elevator story never actually happened.

(There's several books people have published about their time at Apple where he yelled at them sometimes, but I note all those people were distinguished engineers+ and he'd made them multimillionaires.)

> (There's several books people have published about their time at Apple where he yelled at them sometimes, but I note all those people were distinguished engineers+ and he'd made them multimillionaires.)

I feel like that's not a good excuse for yelling at people, but I guess not having made anyone else a multimillionaire and no one having made me one, I don't know the proper decorum for them.

Should say the book authors themselves agree, it's not like they were calling him out. This mostly came from nontechnical commentary who just thought they were low-level guys getting yelled at by the CEO.

They're both illegal and they both involve AAPL stock. Otherwise, the comparison is vapid.

Gee, thanks. I just thought I'd remind the younger crowd who possibly weren't aware of something relevant that happened in 2001.

You're right it's "something." Not something "relevant" though.

> Morally speaking I find this comparable to insider trading.

What? If he had just taken the original vesting terms without arguing he would have gotten the lower share price and the outcome would have been the same, right?

Irrelevant, he didn't.

Don't see how that's irrelevant. From my perspective the share price was already agreed on, the only thing that was still being negotiated was the vesting schedule.

From keithwinstein's post:

https://www.theguardian.com/business/2006/dec/30/citynews.ne...

> Apple Computer yesterday admitted that records of the board meeting that handed chief executive Steve Jobs 7.5m share options were fabricated.

From the same post:

> In fact both sets of options were cancelled in March 2003 before they were exercised.

So I guess it’s irrelevant?

So the thing is it's not wrong to backdate stock options provided you disclose you are doing so. And Apple didn't, that was where they went wrong, and the harm was to the Apple shareholder because his shares got diluted deceptively.

Keep in mind that backdating options can be legal. It's illegal to do this and not disclose it to shareholders. My understanding is that this is the same scenario that the Blackberry team got in trouble for.

I don't think anybody's saying that employees were wronged by options backdating. It's fine for companies to award options to different employees at a uniform strike price out of a concern for fairness. In broad terms, companies can compensate their employees mostly however they like.

But whatever compensation a company awards, they have to account for it and in some cases truthfully disclose it. It matters when the employee gains the ability to exercise the option; awarding an at-the-money option isn't the same as an in-the-money option (and wasn't in those days).

Lots of companies were doing this; in Apple's case, they falsified the minutes of their Board of Directors to invent a special meeting so they could pretend they had compensated Steve Jobs (and others) differently. (https://www.theguardian.com/business/2006/dec/30/citynews.ne...)

My sense was that stock options became unfashionable after the dot-com crash. That is at least why I assumed Apple switched to RSUs. There may have been other legal reasons though.

Could I please have your peanuts?

There is a lot of complain about in executive compensation. High on my list is Sundar Pichai. And you can go way beyond that to the likes of Marissa Mayer or Meg Whitman.

The intent behind insider trading and similar things is that you are effectively stealing from shareholders or the company.

But you want to use Steve Jobs as an example? Whether you like Jobs or not, the wealth he created for Apple shareholders is completely undeniable. By comparison to a lot of executives today, JObs' pay packet wouldn't even hit the top 10.

Trying to argue that options backdating or any other such allegation somehow defrauded any Apple shareholders is such a stretch it belies someone who typically just hates Jobs and shouldn't be taken seriously.

I'm really in awe of what Jobs created. Still, wrong is wrong. I frankly find your attitude weird. I am capable of holding multiple (sometimes conflicting) thoughts/opinions about someone - are you?

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