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Apple's Streamlined Options Operation

During a critical period between 2000 and 2001, decisions on stock options grants at Apple (AAPL - Get Report) were made not by an independent committee of directors but by the company's board -- and potentially, CEO Steve Jobs.

Such decisions at Apple, including who receives options and their grant date, are usually overseen by a compensation committee comprising two to three independent directors. Some Wall Street analysts have suggested that bureaucratic layer is why Jobs won't be implicated in the company's ongoing probe into "irregularities" it has found in options grants made between 1997 and 2001.

"Even in the worst-case scenario where AAPL is found guilty of granting options improperly, we do not believe Steve Jobs is liable," wrote Shaw Wu, in a research note in late June, immediately after Apple first revealed its options problems. "The reason being the compensation committee at AAPL is run by an independent board who are not employees of AAPL."

But that hasn't always been the case. From April 2000 to August 2001, Apple's board didn't have a compensation committee, according to the company's regulatory filings. Instead, decisions about options grants and executive pay were left up to the board itself.

At that time, Apple's board included at least two directors that the company itself didn't consider to be independent, Jobs and Jerome York, who was then CEO of MicroWarehouse, an online and catalog retailer that accounted for about 2.9% of Apple's sales in fiscal 2001.

The extent to which Jobs participated in board discussions about options during that time period is unclear from Apple's filings. In a proxy statement filed in March 2001, which covered the company's fiscal year ended in September 2000, the company said Jobs "does not participate in deliberations of the board concerning executive compensation."

But the company did not clarify whether Jobs recused himself only from discussions about his own pay as CEO or from all discussions about compensation for top-level management or options grants to them.

And the following year, in a proxy statement which covered the fiscal year ended in September 2001, that caveat isn't there.

Indeed, the second proxy document appears to contradict the first: "From April 2000 until August 2001, the entire board of directors acted with respect to matters previously considered by a compensation committee," the company said in its latter regulatory filing.

The revelation that Apple didn't have a compensation committee during that 16-month period removes one more fig leaf separating Jobs from at least some of the company's questionable options grants, notes Paul Hodgson, a senior research associate at watchdog group The Corporate Library.

"That defense seems to be on somewhat shaky ground," says Hodgson, who has been covering the growing, broader scandal involving stock options backdating .

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