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Steve Jobs, Apple’s chief executive, on Wednesday admitted to knowing about backdated employee stock option practices at the iPod and Macintosh computer maker, as a former chief financial officer resigned from its board over the affair.
Mr Jobs’ admission, and a public apology he issued over the matter, make him the most prominent Silicon Valley executive yet to be tarnished by the spreading options backdating scandal.
“If this were to escalate to the point where Steve Jobs were forced to resign, it would be a disaster for Apple,” said Van Baker, analyst at Gartner. He added, though, that that seemed unlikely, since Apple said on Wednesday that its chief had not benefited personally from the practice.
Apple said that a three-month internal enquiry had shown that Apple had backdated options on 15 occasions between 1997 and 2002. The practice, which involved issuing options to employees at exercise prices more favourable than the stock price at the time, was not in itself illegal, but could have been if companies failed to disclose or account properly for the practice. Apple is one of more than 100 US companies that have been caught up in the affair.
In a filing with the SEC, Apple said that Mr Jobs was aware of the backdating “in a few instances”, but that he “did not receive or otherwise benefit from these grants and was unaware of the accounting implications”.
A statement attributed to Mr Jobs in the same filing said: “I apologise to Apple’s shareholders and employees for these problems, which happened on my watch.” He went on to promise “proper remedial measures… to ensure this never happens again.”
Apple also said that Fred Anderson, a former chief financial officer, had resigned from its board over the affair. The company also said its investigation had uncovered “serious concerns regarding two former officers in connection with the accounting, recording and reporting of stock option grants”. A spokesman refused to comment on whether Mr Anderson was one of the executives involved, or whether its board had requested his resignation.
Henry Hu, a corporate and securities law professor at the University of Texas law school, said that many of the executives caught up in the backdating scandal had probably not acted with any intention of misleading their shareholders. “A lot of executives were not aware [of the accounting requirements], and there were a lot of other things to worry about,” he said.
However, he questioned why Apple and Mr Jobs had not disclosed his knowledge of the backdating three months ago, when the company first disclosed its internal investigation into the matter. “I think it was a bad judgment call,” he said.
Apple’s shares slipped less than 1 per cent in after-market trading on Wednesday, suggesting that investors did not believe that Mr Jobs’ admission would weaken his position at the company.