Former Apple Chief Financial Officer Fred Anderson resigned Oct. 4 from the company’s board of directors following a three-month investigation into alleged irregularities in the way the company distributes stock options to executives. Mr. Anderson, who served as CFO from 1996 until 2004, informed the company that he believes it is “in Apple’s best interests that I resign from the board at this time”.
Apple Computer also announced that the special committee of its board has reported its findings from the investigation into Apple’s stock-option practices.
It’s never how they distribute stock options to the programmers.
BusinessWeek: “Witch Hunt” in the Silicon Valley
http://www.businessweek.com/technology/content/aug2006/tc20060815_8…
From the article:
It’s like this. Did you ever drive the speed limit on 280 (a highway in Silicon Valley where traffic typically moves along at 80 mph or more)? Of course not. Nobody does. Does that make you a bad person? That’s what this feels like. It’s like the police come to you in 2006 and say,”Hey, it turns out we have videotapes of everyone from 2000, and we have video of you speeding 18 times. Here are your tickets.”On the other hand, I don’t think [the SEC] has much of a choice. When academics start publishing their data (on all the companies that issued options at suspiciously low prices), what are they supposed to do? Ignore it? They have to do something with it. And the more rocks they turn over, the more snakes they find. The trouble is that there are people who I think have high integrity who are going to go through a period of duress. They’re going to go through hell.
. . and . .
First of all, backdating options wasn’t illegal. You just had to make sure you disclosed it and properly expensed them. And the laws have changed since [then]. Now, [because new regulations compel companies to expense all options, not just special cases like backdated “in the money”options], the basic fraud issue has by definition gone away. And let’s not forget that most companies’ options vest over four years, so most of the guys who got these grants in 1999 and 2000 never got a chance to cash out anyway (since most tech stocks are trading far below even the backdated prices)
No. This is not right. Backdating options without adequate disclosure and correctly accounting for them is defrauding the shareholder. The industry for many years has been seeking to disguise the real costs of compensation by using stock options and this is what is wrong. Wrong both legally and morally.
If compensation levels and in aggregate are reasonable, there is no reason not to simply pay them and to disclose them. When you backdate, you basically give a salary or bonus award that you do not declare as such.
I find it deeply ironic that Business Week is making an appeal to ‘what it feels like’. Who cares WTF it feels like. Just obey the law, which is not particularly onerous, and even if you comply with it to the letter, still permits ways of accounting for stock option grants that border on the fraudulent in any normal understanding of accounting.
And by the way, many elected officials in Washington have been molesting their pages for many years. Does that ‘feel like’ a witch hunt too?
Edited 2006-10-06 12:56