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MacsAttack

macrumors 6502a
Jul 2, 2006
825
0
Scotland
No, it's not. And a negative finding by the SEC could send a shockwave through the entire high tech sector, as well as the entire stock market in general. Any company that followed the previously believed to be OK practice of granting options in this manner, will be sent scrambling to prevent a share devaluation across the board.

As a recall, this all started when Apple performed its own volantary audit. They are trying to get the situation resolved as quickly as possible.

Just wait till the SEC get to work on MicroSoft and its Magic Accounting (TM) practices. Now there is some job security from a whole bunch of SEC employees :D The Feds got Capone on tax evasion in the end. Will the SEC take down Billy-G?
 

shamino

macrumors 68040
Jan 7, 2004
3,443
271
Purcellville, VA
options are just a "get rich quick"-scheme. bunch of execs giving each other even more money...
I don't know if you've ever worked for a tech company, but options are given to most employees, not just executives.

Options are often given to engineers, even newly-hired ones, in tech companies. The options become vested (and therefore exercisable) over time (typically a 4-year period). If they quit before the options vest, then they are lost. If they stay with the company, and the company does well, the options become worth a lot of money.

This is a very good way to convince a good engineer to put out his best work and to not seek work with other companies.
 

flir67

macrumors 6502
Jun 23, 2005
256
0
if apple stock goes back down to 50.00 a share, I'm in with a buying some apple cheap. go ahead and run people of those who are afraid of apple screwing up. there are equal amounts of us who are waiting to "scoop up" apple stocks dirt cheap and in 10 years make money.

I see possible a second round of those money makers that being us soon if it drops. :)

either way it will balance out for the better just so sj doesn't leave.

he's done so much for apple with bringing it back this time.
 

Bye Bye Baby

macrumors 65816
Sep 15, 2004
1,152
0
i(am in the)cloud
Not quite

hopefully this debacle makes companies realize that stock-options are retarded. instead of giving employees possibility of buying shares at a discount at some future date, why not simply give them bunch of shares at market-price, with the condition that they can't sell them for certain time-period and/or until shareprice reaches certain level? because with options they can make money even when shareprice goes down? well, why should they be rewarded then? why should some execs be rewarded when they do a crappy job?

options are just a "get rich quick"-scheme. bunch of execs giving each other even more money...

A little thing called tax. It's not quite that easy and so that's why they do it. It is about the 'money' as they say, precisely by not letting Uncle Sam dip too much into your pockets.
 

dscottbuch

macrumors member
Mar 13, 2002
85
35
What is an ISO

hopefully this debacle makes companies realize that stock-options are retarded. instead of giving employees possibility of buying shares at a discount at some future date, why not simply give them bunch of shares at market-price, with the condition that they can't sell them for certain time-period and/or until shareprice reaches certain level? because with options they can make money even when shareprice goes down? well, why should they be rewarded then? why should some execs be rewarded when they do a crappy job?

options are just a "get rich quick"-scheme. bunch of execs giving each other even more money...

This would be horrible for employees because of the tax laws. This is one of the reasons the incentive stock option (ISO) structure was created. Under your scheme and the current tax laws the employee would be liable to pay taxes (cash out of his/her pocket) on the value of the shares received. They then could not sell them to cover the cash flow and if the stock tanks there are out the cash.

ISO's avoid this while preserving the value for the employee.
 

IJ Reilly

macrumors P6
Jul 16, 2002
17,909
1,496
Palookaville
This would be horrible for employees because of the tax laws. This is one of the reasons the incentive stock option (ISO) structure was created. Under your scheme and the current tax laws the employee would be liable to pay taxes (cash out of his/her pocket) on the value of the shares received. They then could not sell them to cover the cash flow and if the stock tanks there are out the cash.

ISO's avoid this while preserving the value for the employee.

In fact, Apple cancelled the Steve Jobs options in question and replaced them with an outright grant of shares, so it can't be all bad. Worst case scenario, the receiver has to sell some of their shares to pay the taxes. Boo-hoo to that, I say.

Companies can still grant options, even at backdated prices. They must account for them properly is all.
 

dscottbuch

macrumors member
Mar 13, 2002
85
35
In fact, Apple cancelled the Steve Jobs options in question and replaced them with an outright grant of shares, so it can't be all bad. Worst case scenario, the receiver has to sell some of their shares to pay the taxes. Boo-hoo to that, I say.

Companies can still grant options, even at backdated prices. They must account for them properly is all.

You are correct, if the user can sell the shares, I agree - but read the original post - the employees were to be restriced from selling for a period of time. There are many many options (pun intended) when compenstating employees. ISO is actually a very good one when used properly and in context. Don't through baby out with the bath water.
 

Analog Kid

macrumors G3
Mar 4, 2003
8,785
11,168
hopefully this debacle makes companies realize that stock-options are retarded. instead of giving employees possibility of buying shares at a discount at some future date, why not simply give them bunch of shares at market-price, with the condition that they can't sell them for certain time-period and/or until shareprice reaches certain level? because with options they can make money even when shareprice goes down? well, why should they be rewarded then? why should some execs be rewarded when they do a crappy job?

options are just a "get rich quick"-scheme. bunch of execs giving each other even more money...
Executive compensation in general is a mess. Options aren't the problem. Stock options are probably the most sensical means of compensation, particularly for executives-- your compensation is tied to the companies performance rather than making millions just for sitting in the chair.

There are different types of options, and that's part of the confusion. Most run-of-the-mill employees get ISO options, so the purchase price is the market price on the grant date. If the stock dips, there's no money to be made. For us, it takes a year before we can exercise 20% of them and then they continue to vest over the course of the next 4 years.

A lot of executive options are "Non-qualifying options" and I don't know all the details but they do tend to have a lower exercise price and faster vesting.

The reason companies don't just hand shares to employees is that they would need to buy the shares and pay the market rate and they would dilute the price of existing shares. As it stands, the share price will grow more slowly because of the outstanding options, but since no-one exercises options that are "under water" the company doesn't have to deal with he double horror of diluting a declining share price.

Options are just fine. The problem is that there is no shareholder oversight on executive compensation. Hindering ISO options hurts the majority of employees at a high tech company while doing nothing to contain executive excess.
 

jumpinjohn

macrumors member
Feb 4, 2006
53
0
Personally, I'm looking forward to someone to saying something stupid regarding "Apple fanbois" and make themselves look like an ass.

Oh thank you. <catch my breath> After a long day, this made me laugh out loud all alone in my office. So much that I have come out of lurk mode!
 

IJ Reilly

macrumors P6
Jul 16, 2002
17,909
1,496
Palookaville
You are correct, if the user can sell the shares, I agree - but read the original post - the employees were to be restriced from selling for a period of time. There are many many options (pun intended) when compenstating employees. ISO is actually a very good one when used properly and in context. Don't through baby out with the bath water.

So what if they're restricted? I'm not going to shed any crocodile tears over some poor CEO who has to sell some stock to net many millions.

Also, as I said, nothing prevents a company from granting options, even at predated strike prices. They just have to do it properly, is all. Apple, and a lot of other companies, did not.

I wish I knew.

As do we all. FWIW, I take the warnings in the current 10K as being strictly pro-forma. Everybody who cares to know about the risks, already does.
 

g.hobi

macrumors newbie
Sep 19, 2005
9
0
EXCELent Accounting

Just wait till the SEC get to work on MicroSoft and its Magic Accounting (TM) practices. Now there is some job security from a whole bunch of SEC employees :D The Feds got Capone on tax evasion in the end. Will the SEC take down Billy-G?

Don't worry - whenever they get investigated they say that their Acounting is done on Excel. This is good reason for any "mistake"
 

Peel

macrumors 6502a
Aug 30, 2004
579
89
Seattle
Just wait till the SEC get to work on MicroSoft and its Magic Accounting (TM) practices. Now there is some job security from a whole bunch of SEC employees :D The Feds got Capone on tax evasion in the end. Will the SEC take down Billy-G?

Yes, and when they give the SEC a MS Money file that's got all their accounting info in it, it will bog down the SEC's computers and they'll NEVER get their investigation done. (I used Money for one year, and even my modest accounting file would slog the whole Windows computer to a crawl - so what else is new?);)
 

dscottbuch

macrumors member
Mar 13, 2002
85
35
So what if they're restricted? I'm not going to shed any crocodile tears over some poor CEO who has to sell some stock to net many millions.

Again, please read the post(s). I wasn't talking about CEO's but general employees who would generally be hurt by issuing restricted stock (not options) because of the tax implications.
 

longofest

Editor emeritus
Jul 10, 2003
2,924
1,682
Falls Church, VA
:confused: :confused: :confused:

I dont really know what is going on?

Is Apple ok?

or are they in trouble?

Apple is being investigated by the U.S. Security and Exchange commission for illegal stock options backdating and accounting practices that occurred a few years ago. While other companies are also being similarly investigated, Apple seems to be under a microscope mainly because of some falsified documents that were uncovered surrounding a VERY LARGE grant that was given to Steve Jobs in 2001.

The SEC investigation is of a criminal nature, so it is very serious. I'm not a fortune teller, so I can't tell how this will turn out, but Apple is indeed in hot water right now, with Steve Jobs himself appearing to be at least questioned (although we don't know if he himself is a suspect of criminal activity).
 

Canerican

macrumors regular
Jul 22, 2006
216
0
We are halfway to Enron. And with Democrats in power I could a few large corporations being taken down a notch... Remember Janet Reno bullying Microsoft a few years back... I'm not particularily against the Democrat party but I don't think that it helps Apple's cause...

Either way crime is crime... I wonder how Steve Jobs looks in black and white? It doesn't look good for him... But I could envision someone taking the fall for him...

I think that Mac's stocks will take a massive hit, but in the long run it will be fine...

Mac: Hi I'm a Mac, I can do things like backdate stock options.
PC: ...
 

rohitp

macrumors regular
Oct 9, 2003
156
25
Austin, Texas
It is LEGAL

Let's all remember that backdating options is completely LEGAL. It just has to be disclosed and accounted for properly and that is where the questions lie.
 

gwangung

macrumors 65816
Apr 9, 2003
1,113
91
So what if they're restricted? I'm not going to shed any crocodile tears over some poor CEO who has to sell some stock to net many millions.

I'm not sure folks are understanding the issue.

Granting options to rank-and-file employees and managers is a Good Thing (and they WOULD have to sell stock anyway to cash in)(or borrow it..)

What was being discussed in Evangelion's post was a stock grant (not options) that the employee (be it CEO or rank-and-file) would have to pay taxes on THAT YEAR, even if the stock price was underwater and they would lose money on even if they sold all that stock that was granted. (E.g., if the stock was granted with the price at $55/share, the person would have to pay taxes on the grant with all shares valued at $55, even if the stock tanked to $20).

I don't think we want that for anyone.
 

Grakkle

macrumors 6502a
Oct 6, 2006
624
2
Earth
Wait. Let me get this straight. You want to know why a government agency is taking a long time to do its job.

:rolleyes:

It's the government. That's explanation enough.

Argh. This thing with Apple is annoying, but I'm hardly surprised. Unfortunately, stock fraud is too common to be shocking.
 

EagerDragon

macrumors 68020
Jun 27, 2006
2,098
0
MA, USA
yep, it's called a "disclaimer"....... of course ongoing investigations could cause additional expense, headaches, de-listings, god knows what else.....

And they have to mention pretty much any and all possible disasters and whatever else that could affect the bottom line... war, SEC investigations, market forces, you name it, it all goes in there. It's partly about "managing investor expectation", aka providing an ongoing 'reality check', as it is about covering their corporate behinds....

[...reaction to troll...]

So we all wish them well, hope the distractions end soon, and that whoever is responsible goes to prison!!!! (I jest)

uh, as long as it isn't our favorite demi-god/Reality-Distortion-Field-Wizard-of-Woz, Stevie-J!! :cool:

Apple, and we the Apple-appreciating community, need Steve Jobs at the helm.... I say that as a (very happy) shareholder, by the way!!

peace,
tribalogical

Well if the investigation is related to stock holders getting hurt by Apple actions ..... Are stock holders going to sue the goverment for the stock holders getting hurt by the investigation?
How hurt will they get if Steve has to go?
Whatever the outcome .... Get it over soon and don't expect that syock holders will come out rosy out of this mess.
Sometimes the medicine is worst that the cold.
 
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