Apple is being sued over its awarding of stock options. Two
separate suits have been begun by shareholders which make claims
against current and former officers of Apple, the company
announced.
The Californian computer maker has been caught up in a widening
Silicon Valley controversy over the awarding of stock options
during the dot.com boom. Some firms have already admitted awarding
options at lower than market values in order to maximise their
worth to employees.
Apple is the biggest name to be involved in the growing scandal.
The company announced last week that it had uncovered
irregularities in the awarding of some of the options awarded
between 1997 and 2001, including those to co-founder and chief
executive Steve Jobs.
The two lawsuits are believed to come from investors in the
company and have been filed in the Northern District of California
and the Superior Court for Santa Clara County.
"Last week, Apple proactively announced that it had discovered
irregularities in the issuance of certain stock option grants and
is conducting an independent investigation into the matter," said
an Apple statement. "The company is currently evaluating its
response to the lawsuits."
More than 50 quoted companies are being investigated by the US
Justice Department and financial regulator the Securities and
Exchange Commission in allegations of manipulation of stock
options.
Stock options operate by making shares available to an employee
at a certain guaranteed price, even in the future. If the value of
shares rises, the amount by which they rise is profit for the owner
of options.
Discounted options would make the award more valuable for the
employee because the potential profit was larger. Shareholders are
likely to object to the practice because the firm must pay the
price of that award by releasing equity in the company at lower
than market prices.
The practice is legal when properly approved by the company's
board and when shareholders are informed. Shareholders have grounds
for dispute when proper procedure has not been followed.
The scandals could eventually lead to Silicon Valley companies
restating their financial results, and could have knock on effects
on auditors who failed to stop the practice. Already the San Jose
Mercury News has reported that semiconductor maker Micrel is suing
its auditor Deloitte & Touche over its award of discounted
options.
