Steve Jobs: backdating criminal?

The WSJ's Holman Jenkins continues to be a clear voice in the wilderness of reporting on backdating.

* * * the logic of the witch hunt will stop the media from asking the obvious questions, not least because CEO Steve Jobs is a hero to much of the press and there's little appetite for bringing him down.* * *

Jenkins points out that Jobs and Apple were just doing what other firms, including Brocade and Comverse, whose executives have been criminally indicted, were doing at the time – trying to retain their best people rather than stuff their own pockets. Jenkins concludes:

it makes the narrative more crunchy and interesting than the unperceptive journalistic positioning of backdating as a story of executives being allowed to "bet on a horse race after it was run," blah, blah, fulfilling an off-the-shelf morality tale of "executive greed."

Yes this is about journalists.  But there's also a lesson about criminalizing business conduct, a favorite theme of mine. As I said last August.

Should we say that it’s ok to jail the heretofore little known Kobi Alexander, but draw the line at the famous John Lasseter, or Steve Jobs, Pixar’s co-founder and board chair?

If we're reduced to ex post, ad hoc condemnation of business practices, and forced into hazy and indefensible distinctions, as I've said many times, including here, we risk diluting and perverting the normative force of the criminal law.

Comments

[michael webster]

As one who used the term "bet on a horse race after the race has been run", I don't find Jenkins compelling.

The motive for backdating option is not relevant for a criminal prosecution. If I steal to feed my family or simply just for the thrill of it, I am stealing. Motivation may be a factor in sentencing.

But if Steve Jobs was stealing money from the shareholders to hire talent, then he is still stealing.

[TomB]

"Should we say that it’s ok to jail the heretofore little known Kobi Alexander, but draw the line at the famous John Lasseter, or Steve Jobs, Pixar’s co-founder and board chair?"

In a word, yes. Jobs is more important than any 20 other Tech CEO's put together. I say that as a stockholder and a customer.

[Jim Stead]

Backdating isn't against any criminal law, and Apple shareholders have benefited enormously from both the employees hired and Steve's presence. Any talk that something was "taken away" from shareholders is ludicrous and just a cover for people who want to extract money through use of lawyers. Those employees have to be paid, else they work somewhere else.

[Larry E. Ribstein]

I agree with this and similar comments. My only point, and Jenkins' too, is that there's no justification for distinguishing Jobs and the indicted execs.

[save_the_rustbelt]

Send them all to jail.

A 19 year-old with a can of beer is more likely to be punished that a C-level officer cheating shareholders.

Send them to jail and maybe business ethics will see a resurgence.

[Tes1]

Jobs recent subpoena is worrisome. I will remind readers that the initial backdating trial produced 10 convictions for a CEO who did not materially benefit and there was no evidence he or anyone in his finance dept knew that in the money employee options needed to be expensed. Since no company has ever expensed these, in real terms this is a reasonable point of view. The prosecutors in the Reyes case engaged in a whole series of seedy shenanigans such as prosecution lying to the jury regarding finance staff at Brocade being "in the dark"- they weren't- interviews with the SEC/USAO includes transcripts that the controller thought there was no need to expense- and playing the wealth card with some of the defense witnesses. When the defense called out the prosecutorial misconduct of misrepresenting brocade's finance involvement the government claimed it was a separate entity that interviewed Brocade finance (USAO vs SEC) and therefore the prosecution was not lying in its closing arguments (the technicality excuse). Basically a campaign of trickstery and deception to "get their man". Sad and inappropriate. The same sad approach will be applied to Jobs. BEWARE.

[Tes1]

By the way for anyone concerned with the backdating prosecutorial approach I will point them to Roger Parloff's excellent blog on Fortune "Reyes jury out but overall message in" from july 31 2007. Links to the defense motion that contains the statements from Brocade finance who obviously knew of and participated in backdating at Brocade are there, with statements that expensing was viewed as not required (the overriding view then was that choosing a date within the quarter was not seen as backdating- it was seen as a corporate perogative to select any stock date within the quarter for employees)
http://legalpad.blogs.fortune.com/2007/07/31/reyes-jury-out-but-overall-message-in/
This seems to have become campaign of dirty tricks and highly unbecoming. To all corporate officers currently involved in this sting- have caution.