Corporate stock option backdating is as widespread as looting in New Orleans post Hurricane Katrina. From Apple’s Steve Jobs to UnitedHealth’s William McGuire, widely known CEO’s have been caught with their hands in the cookie jar. Apple just released the results of their internal investigation exonerating their Chief Executive.
Its investigation of stock-option grants found no misconduct by current management, but it did find that Chief Executive Steve Jobs recommended or was aware of the selection of some favorable grant dates. However, Apple said Jobs did not financially benefit from the grants and the special committee that investigated the company said it has "complete confidence" in the CEO.
Of two option grants awarded to Jobs, one was improperly dated Oct. 19, 2001, with an exercise price of $18.03, instead of the correct date on Dec. 18, when Apple shares were trading at $21.01. That stock-option grant was for 7.5 million shares. Jobs later surrendered those options without exercising them and realized no financial benefit.
Three bucks a share times 7.5 million shares… that would equal $22.5 million in additional compensation courtesy of Apple shareholders. Can one really return a half eaten cookie to the cookie jar?
Might other analogies apply? If someone stole a big screen TV after Hurricane Katrina and never plugged it in would they have the “complete confidence” of local police? If a thief purloined a diamond but never fenced it should they regain the public’s “complete confidence”?
Securities laws require companies to properly disclose the practice in its accounting.
An illegal act occurred over a dozen years in thousands of publicly traded companies and most companies wants to call it “an error”. What companies call “no misconduct” would land one in jail under slightly different circumstances. Just drop the income level drastically and change the goodie…
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