This post is by Lucian Bebchuk of Harvard Law School
The Wall Street Journal published today my op-ed piece on backdating and corporate governance. The piece, which builds on the Lucky CEOs and Lucky Directors studies discussed earlier in this blog, discusses backdating in Apple Computer and beyond. Here is what it says:
Apple Computer annoucned a week ago the conclusions of a special board committee that examined the “improper dating” of over 6,000 option grants during 1997-2002. The committee found no basis for having less than “complete confidence in [CEO] Steve Jobs and the senior management team,” placing full responsibility for past problems on the company’s former CFO and general counsel. But the company’s report fails to dispel concerns about Apple’s governance.
In reviewing past grant awards, the report discusses separately grants awarded to directors and to Mr. Jobs, but in lumps grants to senior managers other than Jobs together with all other grants. The company is surprisingly silent on whether any of these senior managers received “improperly dated” grants.
The report indicates that Mr. Jobs “was aware of recommended the selection of some favorable grant dates,” but states that “he did not receive or financially benefit from these grants.” But even though Mr. Jobs did not personally benefit from these grants, it turns out that he did benefit from other improperly timed grants.
In particular, Mr. Jobs received in 2002 an award of at-the-money options to buy 7.5 million Apple shares, roughly 2% of the total shares then outstanding. The grant was backdated by two months, which significantly increased the award’s value. Surprisingly, Apple did not disclose the backdating of this large CEO grant in October when it announced the committee’s “key findings.”
