To Steve, Ruby’s move was akin to treason. By taking another job, at an ostensible competitor to Apple, Ruby had, “failed the loyalty test,” to cite the words of Susan Barnes.
Ruby tried to reason with Steve, even suggesting that Apple and Palm “didn’t necessarily have to compete.” That wasn’t realistic, of course, given the clear faceoff between Palm’s handheld devices and the iPhone. In fact, it may have been just wishful thinking. In the end, it didn’t really matter. Palm fizzled out, unable to compete with the iPhone either on its own or as a division within Hewlett-Packard, which bought the company but closed it shortly thereafter. Ruby and Steve never spoke again.
Steve had made an effort to keep Ruby and Avie on board. But the fact that the new jobs he promoted them into turned out to be hollow is an indication of the ambivalence he felt about keeping them. In one critical way, Steve hadn’t changed much. He put the needs of the company ahead of any work relationship. He became even more pragmatic about this kind of thing during his later years. In important ways, his assessment of the team—measured by the same high standards he applied to himself—was clear-headed and brilliant. Losing employees, colleagues, and personal friends was hard on a personal level, for Steve and for everyone else involved in the transitions. But Steve had always believed that when the time came for a change in personnel, a company should move on as quickly as possible. It will soon find that circumstances change, and that it can do just fine without the old heroes.
Where Steve failed in these transitions is in the aftermath. His personal dismissal of Ruby, with whom he’d worked for sixteen years, was characteristic. When others could no longer match his level of effort and intensity, when they became less important to his plans for Apple, or when they left the company, Steve would lose interest. Steve cared more about the potential buying power of his customers than he cared about propping up departing veterans whose contributions he deemed waning. Avie or Ruby should never have expected anything different. Steve had treated his Apple cofounder, Woz, this way, and others along the way had been dismissed in similar fashion. He prioritized ruthlessly, and when Avie and Ruby tumbled down in the ranks of people who could deliver what he believed Apple needed, he moved on.
TWO MONTHS AFTER Avie and Ruby retired, Apple made a seemingly innocuous announcement, in which it tersely acknowledged that Nancy Heinen, the company’s general counsel—and one of just two women on Steve’s executive team—had quietly resigned. She was only forty-eight years old at the time of her “retirement,” yet the news made barely a ripple. One month later, however, the plot thickened when another Apple press release noted that the company had embarked on an “internal investigation,” at the behest of the Securities and Exchange Commission, into apparent “irregularities” in stock option grants made to senior management between 1997 and 2001. Nearly a year later, on April 24, 2007, Heinen would be formally charged by the SEC of being complicit in improperly managing the “backdating” of two 2001 stock grants: one of 7.5 million options to Jobs, and another—the one Jobs himself had initiated after Fred Anderson was recruited by Dell—of 4.8 million options to other members of the executive team. By backdating the options, Heinen had given Steve and his team better strike prices. That in and of itself wasn’t illegal—what crossed the line, however, was how the records accounting for the options were doctored, allegedly at Heinen’s direction, in a way that made Apple’s earnings report look slightly better than it was at the time. Eventually, Heinen settled with the SEC without admitting any wrongdoing, after paying a $200,000 fine and returning $1.575 million of proceeds from options she received from the grants in question.
Anderson had been chief financial officer at the time of the alleged backdating, and the SEC produced an email in which he cursorily approved Heinen’s suggestion of a specific strike date for backdating the options. He too was implicated by the SEC, for supposedly not paying proper attention to the grants, and settled the charges after paying $3.65 million of proceeds derived in the same way as Heinen’s.
All kinds of mitigating factors complicate the backdating story. Apple’s outside counsel, Palo Alto–based Wilson Sonsini Goodrich, had advised Heinen that backdating was probably legal; much the same advice it gave to several other tech companies who were eventually pursued by the SEC, including Pixar. Steve had authorized the backdating, albeit with the assumption that it was legal. And he did himself no favors with his testimony to the SEC. Explaining his own 7.5 million options grant, Steve sounded self-pitying. “It wasn’t so much about the money,” he said. “Everybody likes to be recognized by his peers.” He had hoped, he explained, that the board would come forward on its own with an offer of new options, given his success and the fact that a previous grant was underwater. “It would have made me feel better,” he told investigators.
Talk about tone-deaf. Even allowing for the fact that Steve was not feeling well on the day of his testimony, and that he never imagined his testimony would become public, his words accurately, if unintentionally, reflected a certain callousness that he applied to Anderson and Heinen’s plight. Anderson had resigned from Apple’s board about six months before the SEC came to its decision, when it became clear that the company’s internal investigation would lay the blame for the trouble at his feet, and at Heinen’s. Meanwhile, Steve himself was left untouched by the SEC. “I was hurt,” says Anderson, “because I have tried to live my life as a Boy Scout. The most important things to me are my set of values and how I conduct myself, you know? And everybody that knows me, whether at Apple or anywhere else, will tell you that I have incredibly high ethical standards and that I would never, ever knowingly do anything wrong. I mean, even with people. I always treated people with respect and protected a lot of people from Steve’s idiosyncrasies.”
Anderson deserved better treatment than he got from Steve and from Apple. (Heinen has not spoken publicly about her departure.) But by the time the backdating scandal became a public matter, he was no longer CFO, making him less important to Steve than he had been. Steve could be tremendously helpful to friends and colleagues in times of need, especially when they or their families needed medical treatment. He could also be cold and insensitive to coworkers when their personal issues obstructed what he saw as the company’s mission, or distracted them from giving Apple their full attention. With a little more empathy, and a little more caring for those who weren’t critical to his cause, Steve could have saved himself, and Apple, from a handful of unnecessary headaches.
FOR THE REST of his time at Apple, Steve would manage the company with a mix of old-timers and newcomers. Cook and Ive had been with him for years by now, as had communications chief Katie Cotton, and Phil Schiller, the good-natured head of marketing. Sina Tamaddon and Eddy Cue had gradually become part of the core, and Steve promoted Fadell to head up the hardware side of the iPhone project, and Forstall, another former NeXT whiz, to handle the software. Forstall and Fadell could have become the next “Avie and Ruby,” had they not viewed each other as rivals from the very start. They would clash and undercut each other even more than Fadell had banged heads with Ive and Ruby. Steve found himself refereeing disputes that were beginning to threaten the vaunted synergy that had always been Apple’s “secret sauce”—the blending of clever hardware and ingenious software into a single, magical digital widget. In fact, Fadell was such an explosive force that he would leave the company in 2009, and head off to form a new company, called Nest Labs, which makes a thermostat and a smoke detector that work with your home Wi-Fi network. Fadell is not remembered fondly in the Apple executive boardroom. When certain Apple higher-ups speak of him now, they sneer at the designer of “that little thermostat.” The definition of little is relative, of course. In 2014, Google paid $3.2 billion to acquire Fadell’s Nest Labs.