My numbers may not accurate reflect the stock splits. Here are some additional numbers which may be better.
What I'd like to see is total compensation Jobs received from Apple since returning. The number based on what it was worth at the time and what it would be worth today would be quite different. The former is more accurate, and would need to be adjusted for the return of options (which Apple actually profited from).
Aside from these two grants and the jet, is there any other significant compensation (not counting health benefits/retirement/annual $1 salary)?
bloomberg.com
AAPL:US
Apple Computer Inc
Apple's Jobs Should Give Back the $85 Million: Graef Crystal
By Graef Crystal
Oct. 11 (Bloomberg) -- Apple Computer Inc.'s Steve Jobs should give it up.
What am I talking about?
Some $85 million or so that the chief executive officer collected because of a sleight-of-hand the maker of the iPod music player and Macintosh computers engaged in when it awarded Jobs some mammoth stock option grants. That's money that should go back to the shareholders.
Apple's well-oiled public relations machine has said that because of ``irregularities'' in the grants, the options were canceled ``and resulted in no financial gain to the CEO.''
Nothing could be further from the truth.
Here are the facts:
In January 2000, Jobs was granted what was, and I believe still is, the largest option grant on a single day. It covered a staggering 40 million split-adjusted shares.
The strike price of that grant was equal to the lowest closing price of Apple stock in the 56- and 30-calendar day periods preceding the grant and in the 30- 56- and 90-day periods following the grant. In other words, perfectly timed to Jobs's advantage.
Because Apple's stock plunged when the Internet bubble deflated, that grant wound up underwater, with the market price of Apple's stock below the options' strike price.
Indulgent Board
Apple's indulgent board decided that Jobs didn't need to be punished for the decline in the share price; rather, he needed to be rewarded. He was given a second grant covering 15 million split-adjusted shares in October 2001.
Apple's shares slid more, with the result that the second grant also went underwater.
Then in March 2003, Jobs ``voluntarily cancelled'' all 55 million option shares, according to the company's proxy statement. That cancellation is the basis for Apple's statement that he did not benefit from these options.
But hold on. In its report to shareholders that year, Apple's board compensation committee noted the voluntary surrender of the options and then disclosed that ``in exchange for his cancelled options'' Jobs had been given 10 million split- adjusted shares. At the time the shares were worth about $75 million.
The free shares were restricted from sale for three years. When the restrictions lapsed on March 19, 2006, they were worth some $640 million.
It's hard to think of any Apple shareholder -- or anyone else for that matter -- who wouldn't welcome such a non-benefit.
So how did Apple's board come up with 10 million free shares as the amount to exchange for Jobs's 55 million underwater option shares?
Perfect Hindsight
I don't know the answer to that question, but I strongly suspect that the company employed the Black-Scholes model or one of its derivatives to value those underwater options.
Remember that even an underwater option has value if it has time remaining until its expiration. One chunk of shares would have been exercisable until January 2010, while the other until October 2011.
I calculated the options' value based on the Black-Scholes model. And what do you know, my estimate of their present value at the time they were ``voluntarily'' surrendered was $77 million, a figure almost identical to the value of the shares given to Jobs.
I asked Apple spokesman Steve Dowling whether the term ``irregularity'' was a synonym for ``backdating'', or deciding after the fact, and with perfect hindsight, what day would have been ideal for the grant of an option. He declined to comment.
Blowing Smoke
Rather than answer that question, Apple has chosen to blow a lot of smoke in its shareholders' direction.
Witness this statement from an Oct. 4 filing with the U.S. Securities and Exchange Commission: ``In a few instances, Apple CEO Steve Jobs was aware that favorable grant dates had been selected, but he did not receive or otherwise benefit from these grants and was unaware of the accounting implications.''
``Did not receive'' these grants? Come on. The grants were made. There's no rewriting history allowed here.
Did not ``otherwise benefit from these grants?'' Again, come on. I'd sure like it if someone gave me a $75 million non- benefit.
Later, Apple became a bit more forthcoming, saying that there was something wrong with one or maybe both of Jobs' two option grants, but he was never aware of those ``irregularities.''
Forget Apologies
So what's to be done here?
For my part, I don't think an apology from Jobs, which he has already proffered, is a sufficient remedy.
Maybe it's true he didn't know that someone had put his finger on the options scale in his behalf. But he surely did benefit from that thumb on the scale.
Had those two options carried a strike price equal to the daily average closing prices in the two fiscal years in which they were made, and not the much lower strike prices actually assigned, their estimated present value as of March 19, 2003, when they were exchanged for free shares, would have been about $67 million. That's about $10 million less than I estimated they were worth that day due to their more favorable, lower strike prices.
A more proper exchange, then, would have been to grant Jobs only, say, $65 million in free shares, or about 8.7 million shares instead of 10 million.
Under this scenario, Jobs's free shares would have been worth $557 million as of March 19, 2006, when the restrictions on his free shares lapsed, not $640 million.
On that basis, an appropriate remedy could be for Jobs to give back to the company's shareholders that difference, or a rounded $85 million.
Either that, or declare that he won't take any further compensation from the company for several years.
Jobs may be innocent of wrongdoing. But that doesn't mean he should be the beneficiary of wrongdoing.
He needs to say he's sorry with the one thing CEOs cherish most: Money.
(Graef Crystal is a columnist for Bloomberg News. The opinions expressed are his own.)
To contact the writer of this column: Graef Crystal in Las Vegas at at graefc@bloomberg.net .
Last Updated: October 11, 2006 00:05 EDT |
