Graef Crystal has whipped out his crystal ball in order to find the highest and lowest paid CEOs in corporate America. According to Mr. Crystal, and many other critics, CEO compensation is out of control, and out of whack with the performance of their corporations. Tops on his list of decadent CEOs is Steve Jobs, in his role as CEO of Apple (Mr. Jobs is also CEO of Pixar). Graef Crystal is a financial columnist for Bloomberg News, and I wanted to thank Observer Walter S. for giving me the heads up on the story.

Fuzzy math

According to Mr. Crystal, Steve Jobs is pulling down some US$219 million a year, though that doesn't match reality. Mr. Crystal lists several items of compensation for Mr. Jobs, including the now somewhat infamous Gulfstream V jet at US$84 million, the 27.5 million options Mr. Jobs was granted that were then converted into an outright stock grant worth some US$74.6 million. Combine those two figures, and you get US$158.6 million, but that is compensation for not one year, or even three years, as Mr. Crystal explains after he calls it US$219 million for one year, but actually for 9 years. I'll explain below. First, the relevant quotes from Mr. Crystal's editorial:

A review of total pay from 2000 through 2002 for 243 CEOs running companies with 2002 revenue of $5 billion or more also shows that total pay ranged from a low of $336,000 a year received by Berkshire Hathaway Inc.'s Warren Buffett to $219 million a year for Steve Jobs of Apple Computer Inc.

My review looked at three years because all compensation elements aren't present in any single year. Data for the study were furnished by Equilar, Inc. an independent provider of executive compensation information.

[...]

Besides having the group's highest three-year average annual pay, Jobs also wins my Most-Ludicrous-Pay-Package trophy, which isn't awarded every year. When Jobs returned to Apple in August 1997 to run the company he co-founded, he started out with a pay package of precisely one element -- $1 a year in salary.

Then, in a stunning display of love gone out of control, Jobs' board in 2000 gave him title to a free Gulfstream 5 jet for his personal use and also history's most valuable stock option grant, one covering 20 million shares, equal to about 6 percent of all outstanding shares.

The jet, including reimbursing Jobs for all of his taxes on the gift, as well as the taxes on the taxes on the taxes, set back the shareholders $84 million.

In fiscal 2002, after it became clear his 20 million option shares weren't likely to rise out of the muck of San Francisco Bay, Jobs's board gave him options on another 7.5 million shares.

In March 2003, after the end of my study period, Jobs gave up the ghost entirely on stock options. He turned in his 27.5 million option shares for a grant of five million free shares worth $74.6 million.

You can read the full column at Bloomberg's Web site.

What he left out

Though he mentions the years with virtually no compensation, he is still isolating the total compensation within a one year period, or three year period, depending on which paragraph you are reading. In addition, he did not mention, or seemingly include, the fact that the grant of 5 million shares vests over three years, making the total time frame for the various compensation packages into a nine-year span (1997 to 2006), and not one year (or three years). When looking at the nine year period the compensation actually covers, Steve Jobs' compensation actually comes to US$17.6 million. For more information on that stock option grant, see our full coverage for March of this year.

From the time of Steve's ascension to Apple's throne to today, Apple's stock has almost tripled (note that the stock was almost double what it is now at one point in that time frame, but the overall trend is positive). On July 9th, when it was announced that Gil Amelio was stepping down and Steve Jobs would be taking "an advisory position" with the company, the stock traded at US$6.84 per share, adjusted for a later split. Today, it closed at US$20.18 per share, a rise of US$13.24 per share, or 195%.

That's from during the dot.com boom to after the dot.com bust, and not too many CEOs can say the same thing. There is no doubt that Steve Jobs has given Apple shareholders value. In addition, of course, he also saved the company in the first place, which is something that most likely he alone was able to do.

Who else could have put Apple back on course? How much compensation is that worth?

Tabloid journalism

Steve Jobs is an easy target for lazy journalists and activists looking for a poster boy for CEO decadence. The problem is that in not one article where I have seen Jobs's compensation attacked has the math ever been done properly. We actually covered this in March, as mentioned above, but it bears repeating now.

US$17.6 million per year is a lot of money, and it can be argued that it is too much money, but if we are going to argue about it, let's at least use the right facts and figures. The sort of convenient math that has been used by Fortune, CNN, and now Bloomberg makes for very catchy headlines, but it is intellectually dishonest, at best. Perhaps we should also be looking at the way highly-paid mainstream journalists are taking sensationalist shortcuts, instead of getting their facts straight.

All that said...

For my money, and I do own one share of AAPL for those interested, Steve Jobs has earned the compensation he has been given. He hasn't done everything right, he's far from perfect, and Apple hasn't taken over the computing world; but Apple is alive, one of two profitable PC manufacturers, and the Mac platform is competitive in the face of overwhelming odds from the Wintel juggernaut. Again, I ask who else could have done the same thing?