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????Jobs' own options would lead to the second SEC problem for Apple, though only Heinen would face charges for it. The issue arose after the dot-com crash sent Apple's stock price back below $10, and the Apple board, eager to keep Jobs happy, voted on Aug. 29, 2001, to give him a fresh batch of 15 million options at $8.92. But Jobs - sensitive to press criticism he'd been receiving for his 2000 mega-grant, which was underwater - refused to accept the new award unless the board canceled bis previous one. Accounting complications that made it impractical to do this - as well as wrangling over the vesting schedule - dragged the matter out until December.

????That created a fresh problem: How to price Jobs' award? The stock had climbed since the original board vote back in August, and using that date wouldn't have withstood scrutiny because Apple was now in a new fiscal year. After Heinen reviewed a spreadsheet showing closing prices for a three-month period with Arthur Levinson, a member of Apple's reconstituted comp committee and the CEO of Genentech (DNA), the grant was dated on Oct. 19.

????The grant's strike price ($9.15) wouldn't be as good as it was back in August, but it was better than the $10.51 the stock hit on Dec. 18 - which, according to the SEC, was the proper price for the grant. Levinson informed the board about the arrangements in an e-mail, noting that he had instructed Heinen to make sure Apple was "conforming to all legal requirements/guidelines."

????It wasn't. The SEC claims that Heinen ordered Howell to dummy up the necessary paperwork to make it look like the full board approved the grant at a special meeting on Oct. 19 - a meeting that never took place. Heinen denies this, blaming her subordinate for creating the phony documents.

????All this gave Jobs a paper backdating windfall of about $20 million, according to the SEC. But he never cashed in the options, and in March 2003, after Apple's share price kept dropping, Jobs traded his entire stake of 55 million underwater options for the certainty often million restricted shares. In perfect hindsight, given Apple's soaring stock price since that time, he lost a fortune on the deal. Jobs' restricted shares would sell today for about $1.2 billion before taxes. His options, had he kept them, would yield about $5.8 billion (pretax).

????Pixar's board did have a compensation committee, but it never met. In fact, the entire Pixar board - also handpicked by Jobs - typically met only about three times a year. Jobs personally negotiated options awards with key executives.

????The biggest such grant at issue - two million options - had gone to Toy Story director John Lasseter, Pixar's star creative executive, as part of the ten-year contract he had negotiated with Jobs in 2001. Jobs never received Pixar options himself, but he owned more than half the company, and locking up Lasseter led Disney to buy Pixar in 2006, in an enormously lucrative deal for Jobs that made him Disney's largest shareholder.

????Joe Graziano, the former Apple CFO who served on the Pixar board from 1995 until the Disney sale, acknowledges that Lasseter was "the single biggest asset at Pixar." He blames any backdating problems on "an administrative glitch," delaying the completion of paperwork authorizing grants that Jobs had promised. "It was normal for him to come into the board and say, 'This is what we want to do for compensation. We got these two guys. We want to give them these shares and lock them up.' And the board said, 'Go for it.' But unfortunately the documents get signed months later."

????That, of course, means the grants were issued improperly. And "glitches" don't explain how grants to the company's most valuable players could be issued at the lowest annual stock price in four separate years.

????Pixar, by the time of the backdating disclosures, was no longer a public company but a Disney subsidiary and had no board of its own. At Apple, however, shareholder activists have expressed dismay with the way the company has dealt with the matter. Jobs did issue a brief statement that promised remedial measures and said, "I apologize to Apple's shareholders and employees for these problems, which happened on my watch." But beyond its initial press release and a limited elaboration in a subsequent SEC filing, Apple explained nothing about how the backdating had occurred and demanded repayment from no one.

????In a detailed report to Apple investors, ISS criticized the board's lack of candor, stating, "Steve Jobs has been instrumental in creating significant shareholder value; however, a cult-like devotion to any CEO can be a huge downside risk to shareholders." Glass Lewis, another shareholder advisory firm, described the special committee findings absolving Jobs as "an attempt to whitewash the backdating scandal."

????At Apple's annual shareholder meeting last May in Cupertino, the two firms recommended that shareholders withhold their votes for reelecting most of the outside Apple directors. For three of the directors, more than 30% of shareholders did. By the rubber-stamp standards of such proceedings, a 30% vote against directors of a company on a tear - the iPhone was about to go on sale, the stock was headed to the moon - is noteworthy.

????When the CEO of a publicly traded corporation is diagnosed with a serious illness, what is his obligation to inform shareholders? There is no clear answer.

????The SEC requires that any public company disclose material information to investors so that they can include it in their calculation of whether to buy or sell a stock. But there are no specific guidelines governing health issues, and the SEC has never taken action against a company in this area. It is generally accepted that a company should disclose the diagnosis of a CEO's fatal illness, while it need not say anything about a problem like a broken arm. Everything in between is problematic - and the tension between privacy and shareholder interests is even greater when the CEO is so powerfully identified with the company's fortunes.

????Different companies have handled the problem in different ways. When Intel (INTC, Fortune 500) CEO Andy Grove was diagnosed with prostate cancer in 1995, he made no formal disclosure - Grove chose to write about it instead in a 1996 article for Fortune. On the other hand, Berkshire Hathaway's Warren Buffett - one of the few Fortune 500 CEOs considered as essential to his company as Jobs is to Apple - issued a press release in June 2000 days after he learned he would need surgery to remove benign polyps along with part of his colon, even though the procedure was considered routine.