How Apple’s Options Fraud Almost Killed the King

In the pantheon of corporate mythology, few stories are as powerful as Steve Jobs working for $1 a year.

It was the ultimate flex. It signaled to shareholders: "I am not here for a paycheck. I only eat if you eat." It made him look like a monk in a mock turtleneck, purely devoted to the art of technology.

But in corporate America, nobody works for free. Especially not sharks.

While the public was swooning over the $1 salary, the SEC and the Department of Justice were investigating a compensation scheme so aggressive it makes Wall Street bonuses look like charity. This is the anatomy of the Options Backdating Scandal of 2006 — the moment Apple almost lost its head.

1. The Time Machine for Money

To understand the crime, you have to understand the instrument.

Stock options are a simple bet. The company gives you the right to buy a share at today’s price (the "strike price") anytime in the future. If the stock goes up, you buy low, sell high, and keep the difference. If the stock goes down, the option is worthless.