The Economist authors one of the stupidest pieces the Macalope has read on the options scandal (and that’s saying a lot!).
The piece pimps Larry Ribstein’s Apple Rule which states that:
The Apple Rule provides for an exception from corporate criminal liability when a popular business executive is accused of, or presides over a company that is accused of, misconduct. “Popular” is defined as “liked by journalists.”
This rule is actually just a means to an end for Ribstein, and that end is ending the criminalization of impromper backdating.
So are we going to lock up America’s most popular entrepreneurs, make untenable distinctions in who gets prosecuted, or finally understand that the criminal justice system is a wildly inappropriate way to deal with agency costs like those involved in backdating?
See, lying to your investors is just an “agency cost”!
Uh, no. The problem investors have is not with the amounts that were awarded, it’s with the fact that they weren’t disclosed.
Look, the Macalope may think that some executives are overpaid in this country, but it’s pretty much just at companies that are in the toilet, so he’s not some anti-compensation nut. He just believes that executive compensation should be properly documented and disclosed and that’s the crime we’re talking about.
Here Ribstein uncritically regurgitates the defense’s position in the Brocade case that the rule they violated was “obscure” and everything they did was “in good faith.” It’s true that in this case the defendants did not personally benefit from the improperly backdated options, but they approved scores of them and failed to report them adequately (although the defense is attempting an interesting maneuver in regard to that).
But they didn’t benefit! Well, if they’re propping up the company’s reputation by buying talent with an expensive mortgage, they could have benefitted. Also, while it’s an overblown analogy, if someone robs a bank and gives the money away, they still robbed a bank.
Getting back to the Economist, riffing Ribstein it claims that Steve Jobs has not been charged with a crime because he’s popular among journalists.
Is the basis of that premise — that he’s popular among journalists — even true? Which journalists? Surely not John Dvorak.
And even if it is, who believes U.S. attorneys really take their marching orders from journalists? Why, egotistical journalists!
Quod erat demonstrandum!
The Macalope has long subscribed the belief that the further up the journalism ladder one climbs, the more likely one is to act like one of the eponymous characters from the movie Heathers: spoiled high school girls who believe the whole world revolves around them.
Point of fact, the reason there have no charges filed against Steve Jobs is not because of his popularity. It’s probably because no one’s uncovered any evidence that he did something wrong (and please take note that this comes from a blogger who has already been on the record as suspecting that Jobs probably did do something wrong). Or it’s because Apple only finished its own investigation last quarter. Or — hey, here’s a thought — because the Bush administration recently fired Kevin Ryan, the U.S. attorney in charge of the investigation. Maybe, just maybe, the SEC and U.S. attorneys have their own set of motivations, which could include but is not limited to self promotion, timing and a wacky little thing we like to call “justice”.
Nah! It’s gotta be because some journalists likey the Steve!
The hubris on display here is truly astounding.
Still, that leaves open the question of if, and how, a business executive can get to be so popular with the media that investigators steer clear.
Wow. The editors at the Economist sure thinks a lot of their profession. In order to avoid prosecution, a CEO needs to be popular with — not shareholders, not the public, not the government — journalists.
After pumping up the importance of its own profession, the Economist concludes:
Our rule: if a criminal prosecution is likely to hurt a company’s share price, then don’t prosecute.
That’s an absurd blanket statement. God knows the Macalope’s not arguing that Steve Jobs should be sent up the river sans paddle if he were ever to be charged and convicted of attempting to increase his largesse at the expense of Apple shareholders, but Ribstein and the Economist are arguing he shouldn’t be punished at all.
There is a middle ground here and we’ve already discussed it, but the words of Alan Murray apparently bear repeating.
If Mr. Jobs participated in backdating options, he should be punished. To let him off the hook would send a terrible signal that some people are exempt from the rules or above the law.
But any punishment that hampers his ability to continue running the company would be a mistake. That is punishing the victim, and only compounds the crime.
In other words, fine him, leave him as CEO and move on.
Is the government being overzealous in its pursuit of these cases? The Macalope supposes it’s possible. But turning a blind eye to executive malfeasance isn’t exactly a solution.
The Macalope holds an inconsequential number of Apple shares.