The companies were awarding the options later but then marking the awards to earlier dates, when the stock's price was low.The reason for doing this was simple: stock options priced at or above where the stock is trading (aka, "out of the money" options) get favorable tax treatment compared to stock awards priced below the market price (aka, "in the money" options).Just so, which midlevel investigator at the Securities and Exchange Commission would have the temerity to recommend to Chairman Christopher Cox that the agency haul the most successful Silicon Valley entrepreneur into court?
Writing in In the 1990s, nobody—officials, opponents, NBA Commissioner David Stern, television announcers—suggested Michael Jordan be called for traveling when he palmed the ball and took an extra step while driving to the basket.Still, given that (a) backdating helps make earnings look better than they are; and (b) Jobs is a huge shareholder of Apple (10.12 million shares, as of last April), how could he not benefit from this behavior? Jobs recommended some backdating dates for other employees.It turns out that Jobs did, indeed, receive backdated options—just not at his own direction. 18, 2001, when the stock stood at .01, the company gave Jobs a monster 7.5-million-share options grant dated Oct. By doing so, the company gave Jobs million in compensation for which it did not account properly. It also pretended the options grant was approved at a special board meeting, when no such meeting occurred. He received a massive grant that was approved at a phantom board meeting, though he didn't know about the phony meeting.And he never cashed in those options because they were replaced in 2003 by a grant of restricted stock.CEOs at other companies have been forced to resign for such activities. His job may be saved by the fact that he did not directly profit.After accounting for forfeitures, Apple was forced to recognize stock-based compensation expense of 5 million on a pretax basis that it hadn't done so previously.Apple has essentially blamed former chief financial officer Fred Anderson and former general counsel and board secretary Nancy Heinen, both of whom are no longer with the company.The basic idea was that many companies seemed to award stock options on days when their stocks were at low-points, which increased the value of the options when the stock increased and made the stock cheaper to buy for the executives.The academics concluded that something funny was going on.Apple's 30-year history is divided into three phases: the golden early years in which Jobs and co-founder Steve Wozniak revolutionized the computer industry (1976-1985), the dark ages in which the company floundered after Jobs was ousted (1985-1997), and the glorious restoration (1997-present), in which Jobs ushered in a new golden age, making hip new computers and revolutionizing the music and entertainment industry with the i Pod. Employees love their visionary leader who has spread options throughout the company.Stockholders and analysts love him for delivering stunning returns.