And it's not too difficult for that boss to find ways to get you fired if they feel betrayed by you reporting them. Giving you impossible deadlines, tasks you aren't well suited for, dropping hints to other people that you're not performing well, etc. Corporate politics are ugly and are designed to get around HR.
Or, maybe HR takes your side, who knows, but I think a lot of people are afraid to report out of fear for their jobs.
Also he asks what is the right way to react? To agree or to disagree. :)))) I just can't stop laughing. In his narrow mind these are the only options and they are both wrong! A true engineer will just ask why? and then shut up and listen. But these days everybody has an opinion. My opinion is that Earth is flat. There you go.
They'll do nothing and successice complaints will remove you from a role which requires you interfacing with the CEO and then someone else who is capable of taking these blows will get the compesation and influence you had when you were in that role.
It's a balancing act, you can't have everything your way.
What was the right way for me to react? It would have been a bad idea for me to agree with Steve, raising the question of why I would offer him inferior work. But it would have done no good to disagree either, unless I was willing to enter into an on-the-spot debate with a famously mercurial CEO—and at that moment, I wasn’t.
The answer is easy. Immediately tell your boss that he is using inappropriate language, stop the conversation, and report him to HR. I'm pretty sure this is what Apple's official policy for this sort of situations tells you to do.