Why Jobs has the backing of Apple's board

…likely to suffer more pain from the departure of its iconic chief executive than it would if the board continued to defend Jobs — as long as no criminal charges are filed as a result of the investigations.

"When the stock price is going down, the improprieties seem to be a bigger deal than when the stock price is going up," said David Larcker, a professor of accounting at Stanford University and director of the university's Corporate Governance Research Program.

Apple is certainly on a roll. The company's stock is up 14 percent over the last 52 weeks, after several quarters in which it has exceeded Wall Street's financial expectations with strong iPod and Mac shipments. And it's got analysts buzzing about the potential for a product — the iPhone — that isn't expected to ship until June.

Also, there's no formal standard for board members to follow in this situation. "As you would expect, boards have different tests for this kind of stuff," Larcker said. "If a company is having a lot of trouble, and something happens, it seems to me they are much quicker to pull the plug on the chief executive."

No doubt, Apple has talented designers, technical wizards and savvy marketers on its payroll. But perhaps more than in any other company in technology, Jobs gets more credit for Apple's successes than other chief executives, based on his track record, demanding management style and the famous reality distortion field — the mix of charm, charisma and marketing Jobs uses to get projects done.

As a result, Jobs is perhaps Apple's greatest asset.

For a company its size, Apple has a relatively small, seven-member board. Besides Jobs, it's a who's who of San Francisco Bay Area business, including Arthur Levinson, chief executive of Genentech; Intuit chairman Bill Campbell; Google chief executive Eric Schmidt; former Gap chief executive Millard Drexler; and Jerry York, the former chief financial officer of IBM who is now the head of the venture capital firm Harwinton Capital.

But the best-known member of the board is documentary maker, internet entrepreneur and former vice president Al Gore. He has taken a prominent role in the backdating investigation, as co-leader of the investigation with York. Given that it's likely Gore continues to harbour political ambitions, his public stance on this issue suggests he had the full backing of Apple's board, said Patrick McGurn of Institutional Shareholder Services, a proxy firm.

Said Stanford's Larcker, "Ultimately, the professionalism of the directors has to come into play. If you're a board member, what is it you view as totally out of bounds?"

Boards also need to consider public opinion when making these types of decisions, and it would be hard to find an Apple customer or shareholder who thinks the board should take a tougher stand with Jobs. "It's fine for boards to say, 'It would be a bad thing for shareholders [to remove a chief executive], and we're going to fight this thing until it's a criminal issue of major proportions.' There are other times when its more inconvenient to fight the PR battle," Mader said.

Of course, Apple's devoted fans are unlikely to care about what Jobs may or may not have done. Financial analysts have been quick to seize upon the results of Apple's internal investigation exonerating Jobs, and investors know how important Jobs is to Apple.

"They [the board] may be as likely to get sued if they removed Jobs at this time than if they didn't," McGurn noted.

It's no surprise, then, that there appears to be little pressure on Apple's board to take any action.

"Unless the evidence it found was absolutely black and white that he had committed some sort of fraudulent act, then the chances would be good the board would give him a pass," McGurn said. "Then they would cross their fingers that the regulators would come to the same decision."