The Apple rule gets a workout

Today’s WSJ reports that Steve Jobs helped negotiate the employment contract between Pixar and its famed director John Lasseter that included evidently backdated options. The Lasseter backdating was reported last August, so today's news appears to be some more suspicious details and Jobs’ possible involvement in the backdating.

As I said at the time of the initial Lasseter story,

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?

I have since called that the Apple Rule, and asked:

Should criminal liability . . . include a "successful executive" doctrine? Or will the backdating "scandal" finally force us to face the fact that criminalizing agency costs doesn't work?

I refined the rule here:

The Apple Rule provides for an exception from corporate criminal liability when a popular business executive is accused of, or presides over a company that is accused of, misconduct. "Popular" is defined as "liked by journalists." In the event of allegations of criminal misconduct touching a "popular" business executive, said executive or his company may avoid trouble by aiming the investigation toward an underling.

By contrast, when an "unpopular" business executive (i.e., unliked by business journalists) is associated with criminal misconduct, the "Enron rule" applies. This means that the executive becomes the target of the criminal investigation. Now the underling may sell his or her testimony against said executive to prosecutors in exchange for favorable treatment on sentencing in order to enable the prosecutors to get their man.

Now we have both Jobs and Lasseter, and possibly Michael Dell.  So are we going to lock up America's most popular entrepreneurs, make untenable distinctions in who gets prosecuted, or finally understand that the criminal justice system is a wildly inappropriate way to deal with agency costs like those involved in backdating?

Comments

[lou F]

i am not a lawyer but I find your ideas to the extent I understand them worthy .
However, why do you insist Steve Jobs is"popular" and is getting special treatment. Imo his name is unjustifiably dragged through the mud with
suspicion innuendo every week . In their attempt to
to sell papers he's become the Wall Street Journal's
poster boy for all things evil It has got investors scared. The media are already speculating on how much his company will be worth when he goes to jail ..does anyone
truly believe he intended to mislead investors? I don't . Why don't you lawyers trust the opinion of other lawyers:?
The findings of the The independent counsel and its forensic accountants (“Investigative Team”) reviewed the facts and circumstances surrounding stock option grants made on 259 dates. The Investigative Team spent over 26,500 person-hours searching more than one million physical and electronic documents and interviewing more than 40 current and former directors, officers, employees, and advisors. Based on a review of the totality of evidence and the applicable law, the Special Committee found no misconduct by current management.
Please address the media's interest in keeping this backdating" scandal' alive .