Apple (AAPL) released its annual report this morning, along with details of its options backdating investigation. The company will $84 million in earnings, but board member Al Gore specifically exonerated Steve Jobs, saying the board "has complete confidence" in him. The financial impact is minimal—$4 million, $7 million, and $10 million in the last three years, respectively—but a full 15 percent of the options granted between October 1996 and January 2003 were found to be improperly dated.
Among those misdated was the 7.5 million options granted to Steve Jobs in 2001. The options were dated October 19 (when the stock was trading at $18) instead of the actual grant date the day before (when the stock was trading at $21). That single clerical "error" would have netted Jobs an additional $22.5 million if Apple hadn't later canceled all the options and replaced them with restricted stock.
Investors are relieved—the stock is up $3 this morning. Jobs' job seems safe. But the SEC could still fine the company.
The issue here is not whether companies should be able to richly reward their executives, but the lack of disclosure. Public companies can compensate their executives any way they want. They just can't lie about it.
Update: (Some financial highlights from the 10K after the break):
Looking at Apple's financials, you can really see how far it's come over the past few years.
Since fiscal 2002 (ended September 30), its sales have quadrupled and its net income has gone from a paltry $42 million to $2 billion. So you cannot argue that Steve Jobs has not done well by his shareholders.
In fiscal 2006, Apple's revenues jumped 38 percent to $19.3 billion, and its profits grew even faster: a 50 percent rise to $1.9 billion.
Last year was the first time Apple made more revenue from iPods ($7.7 billion) than from computers ($7.4 billion). (By comparison the iTunes store, iPod accessories, and add-on services combined brought in only $1.9 billion). The company sold 39.4 million iPods in fiscal 2006, compared to 22.5 million in 2005 and 4.4 million in 2004.
The other thing that really stuck out as I was scrolling through the 10K were all the lawsuits the company is involved in. The "Legal Proceedings" section covers 12 pages. I knew Apple was litigious, but seeing all the lawsuits listed in one place is a bit startling.