Apple Needs Principles


Nocera today is "Weighing Jobs’s Role in a Scandal". (The column

is behind the NYT firewall, sorry.) He goes into a lot of detail about the history

of the executive compensation of Steve Jobs, although he doesn’t

mention the fact that, in hindsight, the decisions that Jobs made ended up costing

him a couple of billion dollars. I know, your heart bleeds.

Nocera dwells on the fact that Jobs is ultimately responsible for the backdating

that went on at Apple, yet will probably get away with it – unlike his

former CFO, Fred Anderson, who recently settled with the SEC for $3.5 million.

With all the finger-pointing, it is difficult to parse whether Mr. Anderson,

a wealthy, widely respected figure in Silicon Valley, did something deserving

of government sanction. What is clear, however, is that Mr. Jobs does not

deserve the free ride he’s been getting from the Apple board, the company’s

investors and government regulators.

I am not saying Mr. Jobs committed a crime. What I am saying is that it is

pretty obvious by now that he was extremely involved in both of the options

grants that have become such problems.

Once again, we run into the problem with a rules-based rather than a principles-based

approach to regulation. Because any rules violation must be punished, Fred Anderson

ends up having to cough up $3.5 million, basically for succumbing to the famous

Steve Jobs Reality Distortion Field. Meanwhile, because no one can work out

what kind of rule Jobs broke, he’s considered to be getting a "free ride".

Under a more sensible principles-based approach, the SEC would be charged not

with punishing problems but with solving them. It could crack down hard on people

who deliberately backdated options in order to maximize their own remuneration

while minimizing their tax bill – something which happened a lot. It could

crack down less hard on companies like Apple, where the backdating by all accounts

seems to be much more of a case of cock-up than conspiracy. And it could crack

down a little bit on individuals such as Steve Jobs, who, even if he didn’t

do anything illegal, did show a disregard for the proprieties of running a publicly-traded


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