It's never a great idea for a multibillion corporation to have an irreplaceable leader. But clearly, that is the case for Apple. What would the investment community think of Apple if Jobs were gone? Who is the brilliant lieutenant who will lead the company past Jobs' 70s?

The question is worth raising after Richard Farmer at Merrill Lynch issued a report that raises the possibility that Jobs was involved in options backdating at Pixar - a revelation that could possibly endanger his role at Apple.

"We believe there are not yet enough facts to form a conclusion on whether key executives might have been involved in creating options irregularities at Apple or Pixar, and our default assumption is that Jobs is not likely to have been involved; however, our review of Pixar disclosures does not allow us to rule out the possibility, given Jobs was a member of the board that made options decisions, and our analysis suggests these may contain irregularities.

[The question] "is whether he knowingly participated in creating option irregularities (at either Apple or Pixar) in a way that constitutes serious direct personal misconduct, which could lead the SEC to take legal action against him, including potentially barring his ability to serve as a director, officer, or financial reporting executive of any public company, including Apple."

(via San Francisco Chronicle)

Options backdating at Pixar seems likely, Farmer says. Five of the seven options grants made between 1997 and 2004 were recorded at the lowest price within months of time they were granted and four of the grants were at the lowest price in the entire fiscal year in which the grant occurred.

The Chronicle looked at Pixar's proxy statements and finds that Pixar's two-person compensation committee didn't meet during those years but Pixar's board handled compensation issues. The board members were Jobs, former Apple CFO Joe Graziano, entertainment lawyer Skip Brittenham and Larry Sonsini, a close advisor of Jobs' who was also involved in Brocade's backdating troubles, which led to prosecution of ex-CEO Greg Reyes.

Backdating is not illegal but failure to properly account for it is. If Jobs approved the backdating and failed to provide the accounting oversight, Apple could still get caught up in the options mess - albeit through the side door.