“If Steve Jobs were alive today, should he be in jail?”
James Stewart of the New York Times says that question is the subject of much debate in the antitrust community. Somehow, I doubt that’s true. It strikes me more as a controversial topic for a column than a provocative subject for a spirited legal argument.
But since he did, in fact, bring it up in his column last week, I feel compelled to answer.
No, if he were alive today, Apple’s (AAPL) iconic co-founder should not and would not be in jail. That’s not to say Jobs didn’t defy the law and push the envelope of ethical and perhaps criminal behavior. He did, and more than once. But that does not mean he belongs behind bars.
If nothing else, we can sum up Steve Jobs in four words: He stretched the limits.
He envisioned what nobody had ever considered. He inspired people to do what had never been done. He achieved what nobody had ever dreamed possible. And he captivated us in a way that no technology executive ever had.
Jobs accomplished those remarkable things because he was remarkably talented, but also because he believed he was special. That belief was at the core of his much talked about reality distortion field. Jobs didn’t think the rules applied to him.
He lived without boundaries.
To my knowledge, there were no exceptions to the one rule that, for Steve Jobs, there was nothing he could not do. And while that also explains the man’s dark side – why he so often skirted ethical, legal, and societal boundaries – that’s not what kept him out of jail.
Stewart presented three cases where Jobs appears to have defied the law, including an employee anti-poaching conspiracy between a number of technology companies. The U.S. Department of Justice has already settled civil action against Adobe, Apple, eBay, Google, Intel, Intuit, and Pixar. And, according to a recent report, dozens of other companies may also be involved.
In addition, Adobe, Apple, Google, and Intel settled a class-action antitrust suit for $324 million a few weeks ago, bringing the total number of companies involved in that settlement to seven. Pixar, Lucasfilm, and Intuit agreed to pony up an additional $20 million between them.
While several embarrassing and damning emails between Jobs and his counterparts were used in evidence, no criminal charges were brought against any of the executives involved in any of the companies. I can certainly see why. Agreements to avoid poaching each other’s employees may be antitrust worthy, but they hardly qualify as criminal behavior.
The second case Stewart sited was the e-book price-fixing conspiracy. A federal judge ruled last July that Apple conspired with six large literary publishers to fix prices and break Amazon’s stranglehold on the e-book market. All of the publishers had previously settled with the Justice Department and Apple is now appealing the case.
Again, there were damaging emails between Jobs and the publishing CEOs, but this certainly was not your average price-fixing case. Apple was actually trying to break Amazon’s near-monopoly and improve competition. Since undercutting the ecommerce giant’s rock bottom $9.99 price per title wasn’t plausible, Apple enticed publishers with a pricing model that would actually help them make money again.
Even the sole law professor Stewart quoted in his article, Herbert Hovenkamp of the University of Iowa, suggested that criminal charges were probably not filed because the practice was so novel that criminal intent would have been hard to prove. Besides, while Amazon’s pricing benefited consumers, its pricing power harmed publishers and authors.
Lastly, Stewart went way back to the stock option backdating scandal that claimed the jobs of dozens of top executives at Apple, Altera, Broadcom, Brocade, Cirrus Logic, KLA-Tencor, Maxim, McAfee, Sanmina-SCI, Take Two, Trident, Verisign, Vitesse and many others technology companies.
Since that took place long ago, let me refresh your memory. There used to be a common practice of backdating stock options so employees would receive a more favorable share price. That’s actually legal. The problem was that companies weren’t accounting for the increased expense properly.
While dozens of executives were prosecuted and a handful got nominal jail time (months, not years), in every case, prosecutors were able to connect them directly to the accounting fraud. Moreover, they all had significant gains from their own personal stock-option grants.
In the case of Apple, an independent investigation by the company’s own board of directors named Sr. VP and General Counsel Nancy Heinen for covering up the back-dating and former CFO Fred Anderson because he should have noticed the accounting irregularities. In addition, both had personal ill-gotten gains in the millions.
As for Jobs, his option grant was underwater – meaning Apple’s share price had gone down, not up – so in 2003, he asked the board to exchange them for 5 million restricted shares, which they did. So not only did the investigation find that he was too far removed from the accounting implications to be responsible, he didn’t personally benefit from back-dated grants, either.
As I said back in 2007, “Jobs dodged a bullet because of 1) his value to Apple's shareholders, 2) his value to the U.S. economy, and 3) just plain luck that neither Apple's board nor the SEC found a smoking gun to force them to do something they didn't want to do.”
So there you have it, the reason why Steve Jobs would not be in jail if he were alive today.
The truth is, remarkable people are usually remarkably flawed. Isaac Newton, Robert Oppenheimer, Howard Hughes, Bill Gates, there’s a long list of exceptional people who didn’t believe the rules applied to them. But as with Jobs, they always turn out to be wrong because everyone is human and nobody is perfect. That’s the one rule that applies to all of us. Even Steve Jobs.
Steve Tobak is a management consultant, former senior executive, columnist and author of the upcoming book, “Real Leaders Don’t Follow." Tobak runs Silicon Valley-based Invisor Consulting where he advises executives and business leaders on strategic matters. Contact Tobak.