Whatever he did, it's OK by us. This broadly summarises the view among Silicon Valley cheer-leaders over news that prosecutors investigating the backdated options scandal are closing in on Steve Jobs, founder of Apple. Mr Jobs stands accused of not only knowing about the backdating of options, allowing executives to take advantage of low points in the share price, but of benefiting from the practice too. According to reports in the US, the Justice Department is also examining allegations that executives faked documents to cover up the backdating.
Apple is one of those cases where the man is indisputably bigger than the company. It's hard to imagine Apple without him. During the 12-year period when he was off doing other things, the company foundered and very nearly sank beneath the waves. It was only after he was persuaded to return in the late 1990s that it revived. Today it's back to the rude health and iconic inventiveness it originally stood for, with a dominance in the online music phenomenon which is beginning to rival Microsoft's monopoly of the computer operating system market. Even its computers are again the height of fashion.
What would happen if Mr Jobs were forced out scarcely bears thinking about. It may be that there is more to Apple than Mr Jobs, but to the outside world it doesn't look like it. Showman, creative genius, visionary leader, brilliant operational manager, entrepreneurial titan, software engineer par excellence - he seems to be all these things and more. Even those who follow the company closely have difficulty naming any other executive with whom to identify this extraordinary success story.
So what is it that he's done wrong? According to the various mealy-mouthed statements issued by the company since the scandal came to light, nothing at all. The company admits that Mr Jobs was aware that some favourable grant dates had been selected, but insists there was no misconduct on his part. Furthermore, he is said not to have benefited from these grants, or to have been aware of their accounting implications.
Accounting implications? The accounting implications are in fact neither here nor there. Rather, it is the fact that backdating amounts to a deception on investors which is the real issue. Nor is the revelation that more than 160 companies in the US indulged in the practice much of an excuse. Apple is a company that sets itself up as whiter than white. That it failed to stop and think about the implications of these practices suggests a deeper corporate malaise.
As it happens, it is not entirely clear that Mr Jobs didn't benefit from the awards. One grant of 7.5 million options to Mr Jobs in 2001 seems to have been done without the authorisation of the board. Although these options were later surrendered by Mr Jobs without him realising any benefit, they were replaced with something else, a grant of restricted stock. It is also alleged in the US press that records were falsified so it appeared the original grant did have board approval.
One way or another, the scandal is refusing to go away. The fear among analysts and investors is that eventually it will bring Mr Jobs down. There's no obvious successor, and even if there was, it is hard to imagine anyone matching up to his high standards of creativity and wealth creation. Without him the company might fall apart.
The contrast with Microsoft could hardly be greater. Despite the company's somewhat uninspiring latterday image as the me-too player of the technology sector, belatedly copying everyone else's innovations, the co-founder, Bill Gates, has at least taken steps to ensure management in depth and an orderly succession. If Mr Gates fell under a bus tomorrow, it wouldn't any longer make a great deal of difference to the company. Microsoft would carry on regardless. The company's collegiate approach to leadership may not result in much innovation, but it does ensure decent standards of corporate governance. The threat that the options scandal poses to Mr Jobs' continued position as chief executive at Apple exposes a wider problem: that he seems to be quite irreplaceable.
Bah, humbug: yes, it's bonus time again
Brendan Barber, secretary general of the TUC, has called for a national debate over executive pay. The Work Foundation meanwhile says that "excessive" levels of pay among top executives is a "perversion of market principles" which "corrodes the basic concept of fair reward". Yes indeed, with City bonuses flowing and executive pay packets swelled to bursting, it's that time of year again, the season of envy and badwill to all men more fortunate than oneself.
I'm not going to try to defend burgeoning levels of City and executive pay. This is a debate which has been going on for as long as I've been in financial journalism. The arguments for and against are wearily familiar. Nor have improved levels of transparency, cries of indignation, beefed-up corporate governance codes, or even changes in the law, succeeded in checking its ever onwards and upwards march.
The unpalatable truth is that growing inequality in pay is an unstoppable reality which little short of outright communist revolution seems capable of reversing. Try to restrict the elite's ability to pay itself what it wants, or tax these people more harshly, and they would only move to somewhere more conducive, depriving the country of the skills to ensure a prosperous economy. It may be unfair, but it is hard to know what can reasonably be done about it.
Few would take issue with the Work Foundation's observation that a "winner-takes-all market has developed among top CEOs". Yet where I would part company with the report's writer, Nick Isles, is in the assertion that growing pay inequality is a "perversion of market principles". It may be the market working in a way he would regard as amoral, but it is not a perversion of the market. Mr Isles seems to think it perfectly reasonable for entrepreneurs and celebrities to have their millions because they earn them through risk-taking and talent. A FTSE 100 boss, by contrast, is said to take little risk, never mind that of the public opprobrium he faces for earning too much.
This seems to me a misleading distinction to make. Even Mr Isles must recognise that the FTSE 100 boss has to be smart, well-qualified, or at the very least a supreme political animal to climb so high on the greasy pole. Companies are run not for the greater public good, but to make money for their stakeholders. The consequences of failure are brutal, if financially cushioned.
Where does Mr Isles place the stars of private equity, whose earnings dwarf those of FTSE 100 bosses, in the hierarchy of shame? Are these latterday asset strippers to be congratulated on their entrepreneurialism and risk-taking, or do they too amount to a perversion of market principles? Or perhaps like football stars they deserve their millions because they are good at what they do?
One of the unfortunate consequences of a global market in skills is that it has a tendency to level up at the top but down at the bottom. A top graduate recruit into the financial services industry in Mumbai can now expect to earn a salary not so very far below that of a similar recruit in the City, even though the cost of living in India is a fraction of what it is here. His inequality with his slum-dwelling neighbour will be an infinitely more extreme one than we see on these shores. Scarce talent can increasingly charge a global rate for the job. The position at the bottom of the pile is far less comfortable, for there are literally billions of people clambering for the unskilled positions that make up the great hinterland of any national economy. The pressure on pay is thus relentlessly down at the bottom and up at the top.
For governments to try to counter these trends would be like spitting against the wind. What they can do, however, is to put in place adequate social safety nets, and ensure decent standards of employment protection, training and education, so that those disadvantaged by globalisation can reasonably aspire to the fabulous rewards the highly skilled, talented and well-educated manage to derive from it. The social and political backlash to these growing inequalities is otherwise likely to be an extraordinarily destructive one.Reuse content