Inside Steve's Brain - Leander Kahney [56]
Later, Jobs got into trouble with his own stock options. In 2006, the Securities and Exchange Commission launched a widespread investigation into more than 160 companies, including Apple and Pixar, that had allegedly backdated stock options. According to the SEC, companies were routinely repricing options to a date prior to the actual date the options were granted—usually when the stock price was lower, which boosted the worth of the stock. Backdating options is not technically illegal, but improperly reporting backdated options is, and, according to the SEC, it was widespread.
In the early 2000s, Jobs was awarded two big stock option grants that were backdated, according to the SEC. In June 2006, Apple launched an internal investigation headed by two board members: former U.S. vice president Al Gore and former IBM and Chrysler chief financial officer Jerry York. In December 2006, Gore and York issued a report that found “no misconduct” by Jobs, although the report admitted Jobs knew about some of the backdating. However, Jobs didn’t realize the accounting implications, the report said. The report laid the blame for backdating on two officers no longer with the company, who were later identified as former general counsel Nancy Heinen and former CFO Fred Anderson. In December, Apple restated earning and took an $84 million charge. In 2008, the matter appeared to be put to rest when the U.S. Department of Justice closed a criminal investigation into the backdated stock options and Apple settled a class-action lawsuit brought by disgruntled shareholders.
Because of repeated stock option grants, employees who have been at Apple for many years have a lot of money tied up in the company. For most staff, there is no better motivator to protect the company’s interests. As a result, several employees told me that they are happy to march in lockstep and zealously enforce the rules. One source, who declined to be named, said he’d happily snitch out colleagues who leaked product plans to the press. The staffer pointed to the Engadget blog, which reported a rumor in 2006 that the iPhone would be delayed. The false rumor caused a 2.2 percent dip in Apple’s stock—knocking $4 billion off the market cap. “I’ve got a vested interest in stopping that kind of crap,” the employee said.
Likewise, Eigerman said he knows that there is someone inside Apple who is sending tips and pictures to an Apple rumor website. He is mystified why anyone would risk their job, and possibly criminal or civil lawsuits, to send product plans and pictures to a website. It’s unlikely they’re getting paid for the information. “It’s very strange to me,” said Eigerman. “The risk is enormous. Who would do that? The psychology is very strange to me.”
Dangling the Carrot and the Stick
Jobs is infamous for his temper, but his considerable charm is often downplayed. He uses both the carrot and the stick to get his team to produce great work. He’s uncompromising, and the work has to be of the highest standard. He sometimes insists on things that are seemingly impossible, knowing that eventually even the thorniest problem is solvable. But he’s also incredibly charismatic, capable of persuading people to do almost anything. Sculley was impressed with those powers of persuasion: “Steve provided phenomenal inspiration and demanding standards to get his team to do such things,” he wrote. “He pushed them to their limits, until even they were amazed at how much they were able to accomplish. He possessed an innate sense of knowing exactly how to extract the best from people. He cajoled them by admitting