At Apple’s annual shareholders meeting in Cupertino on Thursday, Steve Jobs and other company executives heard criticism about the company’s stock-options scandal and the recently announced delay of of the forthcoming Leopard version of Mac OS X, while Jobs himself dished out some criticism of the environmental group Greenpeace.
The most heated shareholder comments at the meeting were over the company’s practice of backdating stock options.
“Backdating stock options is unfair to shareholders who can’t travel back in time and purchase shares at past market lows,” said Brandon Reese, who said he represented the AFL/CIO. Reese then asked Jobs to give back the restricted stock he received for the cancelled options that were improperly dated.
Jobs explained that the Board approved the options grant in August 2001. The grant was actually priced in October 2001, he said, at a higher price than when the Board approved it.
“I actually got my options at a higher price, but I didn’t ask the company to reimburse me,” said Jobs.
Reese then asked Jobs to explain to shareholders what he knew, and when he knew, about the backdating. Reese cited former Apple CFO Fred Anderson’s claims that Jobs knew about the accounting implications of backdating the options.
“Fred Anderson did make some comments,” Jobs said. “I’ve worked with Fred for many years and I think he’s an awfully good guy, but I thought his comments were a little wrong.” Jobs then read aloud a statement from the Securities and Exchange Commission, which praised Apple for its “swift, extensive and extraordinary cooperation” in the investigation, including prompt self-reporting, an internal investigation, sharing the investigation results with the government and implementing new controls to prevent future fraud.
Greenpeace and environmental issues
Although many observers anticipated that shareholders would criticize Apple about its environmental record due to the ongoing campaign against Apple by the environmental group Greenpeace, that criticism seemed to have largely been blunted by Jobs’ essay “A Greener Apple,” which was posted on Apple.com on April 4.
At the meeting, two environmental proposals were withdrawn without being voted on. Two representatives from Greenpeace were present at the meeting and congratulated Jobs and Apple for the company’s commitment to the environment.
However, Jobs had strong words for Greepeace and the way the organization has chosen to measure the environmental commitments of manufacturing companies.
“I think your organization particularly depends too much on principle and not enough on fact,” Jobs said to the Greenpeace representatives. “You guys rate people based on what people say their plans are in the distant future, not what they are doing today. I think you put way too much weight on these glorified principles and way too little weight on science and engineering. It would be very helpful if your organization hired a few more engineers and actually entered into dialog with companies to find out what they are really doing and not just listen to all the flowery language when in reality most of them aren’t doing anything. That’s my opinion.”
Jobs then gave an example of his complaints: In looking for alternate means of producing products without hazardous chemicals, he said, Apple talked to some of the only organizations in the world that could make it happen. Despite the fact other computer makers have claimed they were working on alternatives, Jobs said Apple was the first computer company those organizations had actually heard from.
Jobs then offered to help Greenpeace improve its measuring technology, saying that while Apple supported the idea of an environmental report card, it needed to be a real report card based on science.
“Something that simple could go so far in our opinion,” said Jobs. “We are not going to set up a big infrastructure to engage environmental groups. We are real interested in getting the work done.”
Executive pay
When shareholders questioned Jobs about the way Apple compensates its executive compensation, Jobs said that it was his responsibility to plan the compensation for everyone in the company except himself. The CEO — who has an annual salary of $1, although Forbes magazine estimated his 2006 compensation at $646 million — joked about his own paycheck.
“It’s a pretty simple meeting when it comes to me,” Jobs said. “I get 50 cents a year just for showing up, and the other 50 cents is based on my performance.”
The iPhone and Leopard
In a discussion about the forthcoming release of the iPhone and the recent delay of Mac OS X Leopard, Jobs said part of his responsibility at Apple was to make tough decisions that affect the products the company is working on. Jobs said that while the decision to delay Leopard was not popular with some people, he believed it was the right one to make.
“Leopard will be worth the wait,” Jobs promised.
The Apple CEO also said that his company can’t make up for a limited amount of engineering resources simply by throwing money at the problem. He said that the reason Apple is innovative is because the company is careful in who it hires, and so the process of growing the company’s talent pool can take years.
“I wish developing great products was as easy as writing a check,” Jobs said. “If so, then Microsoft would have great products.”
Jobs also pointed out the challenges Apple faces when entering the cellular phone market. He pointed out that in 2006 there were 135 million MP3 players and 200 million PCs sold. In contrast, during 2006 one billion cell phones were sold.
“We’re beginners and we have a lot to learn,” said Jobs. “The market is large and the opportunities are great. A few of us have been using the iPhone a lot and if you wanted it back, you would have to pry it from our dead hands.”
Jobs did acknowledge that the company is still struggling to decide if third-party developers will be able to create software that will run on the iPhone. It’s a decision Apple “is wrestling with,” according to Jobs.
Miscellaneous questions
Jobs and other senior Apple executives also tackled several other questions regarding Apple products during the meeting, among them:
• Regarding .Mac, Jobs admitted that Apple’s suite of online services hasn’t achieved its full potential, but said the company was working on it.
• When a shareholder asked Jobs for high-definition video content on iTunes and asked if his Apple TV could allow him to rent movies, the CEO smiled. “One never knows,” he said cryptically.
• A shareholder from Vancouver, British Columbia asked why an Apple Store has not come to his city yet. “Patience is a virtue and your patience will be rewarded soon,” said Ron Johnson, Apple’s Senior Vice President of Retail.
Shareholder praise
Several shareholders took the time to stand during the meeting and congratulate Apple and Jobs on doing a “fantastic job” during the last year.
“I watched all of those people get up and say so many negative things,” said Apple shareholder, Lynda Fudold after the meeting had ended. “I’m satisfied with the way that [Jobs] handled everything. The people that are still beating the [options] drum are ridiculous.”