Jobs and Shareholders

Apple's annual shareholder meeting was short on news, but long on drama with several investors grilling the Apple directors who did show up with questions about the stock options backdating scandal.

Apple's entire directors' slate was re-elected, as expected. None of the shareholder resolutions passed, as expected.

The fireworks and interesting nuggets came during the shareholder question-and-answer session.

One of the more interesting exchanges occurred when one shareholder asked how Apple determined whether it would split the stock, a big issue as shares trade north of $100 and at an all-time high. Jobs pointed to the examples of Berkshire-Hathaway and Google as the arguments against a stock split. (Google's Eric Schmidt sits on Apple's board). That exchange led Piper Jaffray's Gene Munster to tell me that a split now appears less likely. Earlier in the day, he had told me a split would happen with 90% certainty.

One investor, representing big labor (AFL-CIO) peppered Jobs about whether he intended to return the suspect stock options. When he was presenting his resolution on compensation reform, he tried to ask a question of Jobs, but was silenced. So when he got his chance at the mike later, he seized upon it.

"I'm a little anxious," he told Jobs.

But Jobs was clear: the options granted to him in August of 2001 were actually priced "higher" when they were awarded the following October. "I didn't ask the Board to reimburse me," he said.

Regarding former CFO Fred Anderson (who settled the SEC investigation into his role in the options in the options backdating scandal, and then accused Jobs of misleading him), Jobs said, "Fred Anderson is an awfully good guy. I thought his comments were a little wrong." Jobs then read, and then re-read the SEC statement essentially absolving Apple of any wrongdoing, and commending the company for its cooperation in the investigation.

"Unless you think there's a conspiracy involving the SEC too, I'm not sure what else to say," said Jobs.

One shareholder wanted to know the formula used to determine Jobs' compensation. Said Jobs: "I make a dollar a year. Fifty cents for just showing up; the other 50 cents is based on performance." The crowd cheered.

He also reserved some choice comments for environmental groups, including Greenpeace, who've been dogging the company over recycling practices. Jobs took steps last week to improve Apple's standing and many resolutions about the topic were withdrawn before today's meeting.

Still, Jobs was quite vocal in criticizing these groups for their reliance on "glorified principles" instead of on scientific facts of any kind. The two sides apparently agreed to disagree, with Apple saying environmental initiatives are now a top priority.

Shareholder Scott Adams complained that only a few directors showed up to the meeting today: Google's Eric Schmidt, Intuit's Bill Campbell, Dr. Arthur Levinson and Jobs. Adams said he knew the kinds of excuses he used to get out of work, or the ones his kids used to get out of school, and he was curious about what excuses work for directors to miss a meeting like this.

Jobs brushed off the criticism saying he holds the entire board in the highest esteem.

Finally, another shareholder recognized that Apple's R&D budget is steadily declining, now 4% of revenue. And he worried that major revenue-generating projects could be delayed, or missed all together. He pointed to the delay in Apple's next-generation operating system Leopard as an example. Jobs said research is a lot more about people and quality engineers than it is about the money.

"I wish developing great products was as easy as writing a check," said Jobs. "If that were the case, Microsoft would have some great products."

And the crowd cheered again.

Questions? Comments?