The backdating at Pixar was in some respects even more extreme than at Apple: top officers were repeatedly granted options on dates when Pixar stock was at its lowest point for the year. On the other hand, unlike the situation at Apple, none of the Pixar options went to Jobs himself. At Apple, the special committee also acknowledged that Jobs may have actually been involved in “recommending” dates for options grants — a circumstance that, on its face, suggests involvement in either backdating or springloading. (The latter term refers to the suspect practice of executives granting options to themselves or others just before new market events are about to give the stock price a big boost, as the executives know due to inside information.)

The story line at both Apple and Pixar appears to be that Jobs, the notorious micromanager who headed both companies at the time of the backdating, did not understand the legal or accounting ramifications of backdating. Interestingly enough, virtually Jobs’s only compensation at either company during this period was coming from the Apple options whose workings he so poorly understood. (During the relevant years, his salary at Apple was famously just $1 per year, while at Pixar it was about $55 per year.)

The thing that puzzles me most is this: If you don’t understand the accounting ramifications of backdating, why do it? Why not just issue the options dated as of the actual date you’re issuing them, and simply choose whatever strike price you think is appropriate — even though it may not correspond to the current stock price?

Take, for example, the situation at Apple, for instance, where Jobs received a grant of 7.5 million options options that wasn’t finalized until December 19, 2001, when the stock price was $21.01. The special committee found that these options were backdated to October 19, 2001, when the price had been $18.30. (Phony documents were created to reflect a board meeting on October 19 which never really occurred.) Well, if you don’t understand the accounting implications of backdating, why not just issue the options as of December 19, but announce a strike price of $18.30?

The answer, of course, is that someone at the company certainly did understand that if you did that, you’d be granting “in-the-money” options, which have onerous accounting and income tax repercussions for the company. The whole point of backdating is to avoid those consequences. To do that, you pretend that the options aren’t in-the-money, even though they really are. So why go through that deception if you don’t understand the accounting implications of granting in-the-money options?

And if Jobs himself didn’t understand the accounting implications that were driving the deception that he himself (at Apple, at least) was benefiting from and, to the extent he was “recommending” grant dates, participating in, why didn’t the underlings who did understand ever try to explain to Jobs the perilous legal situation he was getting himself into? Were they too petrified to tell him something they assumed he didn’t want to hear, or already knew, or both? What a guy to work for.

Can readers explain to me why a company’s executives would engage in backdating when they didn’t understand its accounting implications?