Apple, Jobs, and Stock Options

There has been more than a little noise about executive compensation in general, and stock option backdating in particular. I have been quite vocal about the ridiculous level of CEO pay, it is just silly that people should be getting 9-digit pay — for anything including professional sports. I have witnessed some of the ugliest side of this, with supposedly mature executives arguing to me that, in some way in their mind, their mid-8-digit net worth was inadequate. Little in this realm shocks me any more.

So when the charismatic do-no-wrong CEO of Apple, Steve Jobs, got caught up in the whirlwind of backdated stock options, I was not really surprised. Only just a little disappointed. But in some way, it proves little more than that Steve is, in fact, a mere mortal.

Now, time for a disclaimer. I’m both a huge Apple fan and a shareholder. I’m writing this on a MacBook Pro, am very close to swapping out my Windows desktop for a new MacPro, and have at least eight iPods in the family. I love the simplicity, the way things just seem to work, and the passion for nice design. And the stock has been a winner for us as well. I am as excited as the rest of the planet about the future of the company, especially with the new iPhone in the works. So I am admittedly biased to see the Apple glass more than a little half-full.

To Apple’s credit, they admitted the issue.

Recently it was revealed that Apple issued stock option grants that don’t meet with the standards of scrutiny that should be expected. Specifically, grants were issued with dates that were the most favorable to the grantees, and this news forced the resignation from the board of the CFO at the time of the grants. To Apple’s credit, they admitted the issue, although some complain not quickly enough.

What impressed me the most is that the release disclosed quite frankly that Steve was aware of the issue. Most companies would first deny that anything like this happened, and their CEOs would almost certainly distance themselves from the fallout as quickly as possible. It is refreshing to see at least one company and the CEO admit the issue.

Steve Jobs

But to be clear, Steve is no saint in the realm of money. He is famous for his $1 a year compensation, but this belies his huge stock and option stake in Apple that has made him extremely wealthy. Combined with his Pixar (now Disney) stake, Steve is well off with an estimated $4.9b net worth, placing him at number 49 in the Forbes 400 list. In sum, he ceratinly hasn’t been short-changed with respect to compensation.

In Steve’s defense, however, is the fact that he made his money on the stock of his companies. He doesn’t hold the companies hostage for some huge pay package, he simply owns stock, makes the company and stock grow, and both he and the other shareholders benefit. In short: he earned it.

As a CEO compensation critic, this is just fine with me. As a purchaser of technical products, I love the fact that he has advanced the state of the art and am happy to let him get his just reward. And as a stockholder, I’m ecstatic. The stock is up 10-fold in the last three years. And if that works for Steve too, that’s great.