Apple’s SEC Investigation: Rotten to the Core

The Apple Brand is Larger than Steven Jobs

Apple Computer and SEC InvestigationCUPERTINO – So wait, it’s the 25th anniversary of the Macintosh, and the Securities and Exchange Commission is looking into Apple’s (NASDAQ: AAPL) disclosure of Steven Jobs’ illness? Is this the same brilliant S.E.C. that refused to regulate hedge funds, and could not even figure out that Bernard Madoff was not executing any trades. This after his credibility was challenged by Barron’s in 2001. Is this the same S.E.C. that watched over the complete dissolution and bankruptcy of all of Wall Street?

What is appalling is reading all the anonymous Wall Street speculation about Jobs, comment from people who should know better. Brad Simon, a “former federal prosecutor” told The Wall Street Journal that it “could be a big problem.” Perhaps Simon was speculating about the reality of the issue, but the only right answer to a reporter’s question on his health is: “We’ve known about this illness forever. Let’s pray that he does well.”

Any fool with Google could figure out about Jobs’ condition; his cancer became public in 2004, and it was the subtext of his 2005 Stanford valedictorian speech. (You don’t even have to press search; the auto suggest asks if you want “Steven Jobs health” or “Steven Jobs cancer” without prompting.) The inspirational speech, watched over 2.5 million times on YouTube, talks about his personal journey. It will live on in American business history. In recent months, as Jobs has looked less well, everyone has speculated. So what was new?

Yes, the stock dropped 7 percent on the news, but in this market, and with all the speculation, the drop more likely was not individual investors fearing Jobs’ illness, but the machinations of professional investors, who were reacting to what the reaction of everyone might be when it happened. That’s quite different. In America, you now get in trouble because you do what you are supposed to do, and people bet on it. No wonder Atlas is Shrugging.

But back to the Apple brand, which is so much larger than Jobs. A few thoughts on the situation:

  1. He’s not the only founder who has left a company. How many companies have survived after their founder died or departed? Remember that Herman Hollerith was the founder of IBM; the Watsons came much later.
  2. He’s not the only founder of Apple. The company was founded by Jobs and Steve Wozniak. It was the idea of two men, one of whom left a long time ago. Certainly Jobs is key, but Apple is larger than Jobs.
  3. They are punishing success. It seems like Apple is being penalized for being successful. If Apple was not doing well, all of this wouldn’t be an issue.
  4. How would there be a trial and prosecution? Say Jobs dies soon. Does Apple have to get a statement from Jobs on tape, in case five years from now the company gets prosecuted for the disclosure of the illness? Do they bring in physician records to see how advanced the cancer was?
  5. He’s not God. Jobs left once. Remember that Jobs was forced out by John Sculley, and had to start NeXT. And even though Sculley left, he brought systems into the company. NeXT became the center of Apple’s innovation when he linked back up. But while NeXT was a technology success, it was not a commercial success.
  6. Laws need to be followable. Think of the reality of this situation. You are in the executive office of Apple. Your boss has survived something some do not survive from. It gets worse, but he made it before. How do you determine the right time to mention it? What level of illness is it? Will he live or die? These are questions that there is no answer for, and no company will give an answer that will please everyone.
  7. Jobs is not Apple. He has been doing lots of other things, and the company is just fine. Not only did Jobs have a leave of absence when he first announced the cancer, he also found time to start Pixar (NYSE: DIS). A person who micromanages cannot do both things, further evidence that the company runs on its own.
  8. What other things are now fodder? What if a CEO slipped and went off the wagon and messed up a deal. If he tells his AA group, does he have to tell the SEC? Should a CEO be able to ride a Harley? Should Richard Branson be a daredevil? All of these things risk hurting a company, but one has to make allowances for people to live their lives.

It is interesting that two of the most interesting and innovative business leaders of recent memory, Steven Jobs and Martha Stewart of Martha Stewart Omnimedia (NYSE: MSO), have been the subject of SEC scrutiny. This all came at a time when all of Wall Street went bankrupt because of gross corruption.

Message to SEC: Since Apple is a fruit, the SEC prosecutors who have apparently started a file on Apple would do well to go back to the Bible‘s Book of Matthew and the discussion over fruit trees in order to get some perspective on who to prosecute. Jobs is no saint, but none of us are. Even if you are Buddhist like Jobs, there is a truth there:

Ye shall know them by their fruits.

Editor’s note: I post-edited the Pixar dates…

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