A New Era in Corporate Ethics?

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Musing on Apple CEO Steve Jobsi apology for his companyis stock options backdating problems, as well as HP CEO Mark Hurdis apology that his firm illegally went after journalists, MarketWatchis John Shinal noted: "Call it The Technology CEO Code of Non-Responsibility. And, so far at least, Wall Street and investors have embraced it."

In each case, the respective CEO said he was sorry for his companyis behavior but pointed out that he didnit know it was illegal. Both times, the stock price weathered the situation as former employees took the fall (former CFO Fred Anderson resigned from Apple, while former HP chairwoman Patricia Dunn was indicted).

Mr. Shinal elaborated: "From a legal standpoint, the defense put forth by both Hurd and Jobs appears solid for one simple reason: what their companies did on their watch may not have been illegal. Yes, California has a law against pretexting, but it was just recently signed by Gov. Arnold Schwarzenegger and wonit go into effect until next Jan. 1. Moreover, while Congress has been debating a federal law banning pretexting, as of today thereis no federal law banning the practice, which has been widely used by private investigators for decades."

He continued: "Similarly, scores of tech companies priced options on favorable dates, preceding large stock runups, before Sarbanes-Oxley Act reforms were passed in 2002. Prior to that, however, the federal securities laws in force from 1997 to 2002 -- the period during which Apple said it found some problematic option grants -- left companies a lot of leeway on how and when to price them.

"Simply backdating options, then, like pretexting, may not have been illegal, which means Appleis vague assertion that Jobs didnit understand "the accounting implications" related to the practice leaves him lots of wiggle room."

Mr. Shinal concluded: "Whether [Mr. Hurd and Mr. Jobs] did anything unethical, or whether their approach to leading a company through a scandal will set a standard for Silicon Valley CEOs, remains to be seen."

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