Tim Cook Rejects Politics of the NCPPR
macobserver.com
macobserver.com
The next time someone trots out the tired old "companies are legally obligated to maximize profits/shareholder value" to explain away crappy corporate behavior, I'm linking to this.
And kudos to Cook for telling NCPPR to take a figurative hike.
It's such an idiotic line and is usually given as a poor substitute for reasoning about a company's actions.
The meme about "profit maximization" is one of those Keynesian sayings "of a defunct economist" that seems to rule people's imaginations.
And anyway, actions speak louder than words. What I know of Apple is that it had a CEO who orchestrated keeping wages down for engineers, orchestrated price fixing of ebooks, kept taking credit for other people's work, frequently partook in borderline psychopathic behavior (woz: "I begged Steve that we donate the first Apple I to a woman who took computers into elementary schools but he made my buy it and donate it myself."), etc. etc. If Tim Cook actually goes on to commit some serious dollar on philanthropic activities, I would change my mind about Apple, until then, it's clear that it's all a bullshit PR dance.
In which case they are going to be accused of doing a "bullshit PR dance." Damned if you do...
I saw both the Delaware version and the California version of eBay vs. Craigslist. Neither had anything to do with philanthropy. They involved a poison pill strategy. At the risk of standing in the way of a good rant, I think you'll need a better example.
What this should really say is "obligated to maximize shareholder demands". It has nothing to do with ROI per se, just that the CEO is legally obligated to perform the demands of the shareholders. For public companies, 99% of the time that means maximizing short term profits to make institutional investors happy.
Like it or not, that's the way it is and not every CEO gets to be Tim Cook who has A LOT more leeway with investors than the CEO of "random fortune 500 company".
The NCPPR's view that Apple should do the minimum necessary to meet government environmental rules in order to maximise profits is short-sighted. A lot of people care about environmental issues - as well as things like labour concerns with the factories in China. By doing the right thing and addressing public concerns on these issues, Apple enhances its reputation, which can in turn lead to greater profits.
Tim Cook has a responsibility to protect himself as CEO, the company itself, and the other shareholders, from manipulative questioning by a fringe group. He also has a responsibility to stand for the company's values.
What he's doing IS MAXIMISING SHAREHOLDER VALUE! In the long term the sustainability projects will be important. Over 97% of shareholders rejected the proposal put forward so technically he was doing what the majority of the shareholders agreed with.
Did the stock go up after the event? http://finance.yahoo.com/q/bc?s=AAPL&t=5d&l=on&z=l&q=l&c=
If Tim Cook widely announces what Apple's future philanthropic principles will be, he's giving everyone a chance to decide if they want to own stock in a company which follows those principles. The market will judge that via sales and purchases of Apple stock. What could possibly be more free-market than that?
If Apple had the social and environmental sense of responsibility of GoDaddy, I lot less of us would feel comfortable buying Apple products.
The idea that (i) the entire value of a company is the NPV of future profits to the shareholders, and that (ii) this fiduciary duty is very broad and bears on all decisions made by the directors, so that any decision that might reduce return is prejudicial to the interest of shareholders, does pretty much entail what the NCPPR claim. And there have been efforts in places to expand fiduciary duty in some jurisdictions to this strong requirement. But I have the impression that lawyers generally think the idea is daft and undermines good corporate governance.
IIRC, Steve Milloy of Junk Science operates a crank activist hedge fund that attempts to undermine environmental innitiatives in the kind of way described in the article. I believe they have produced dismal returns for their investors, which suggests that they do not eat their own dog food.
http://www.washingtonpost.com/opinions/harold-meyerson-the-m...
I could believe that oxygen doesn't exist, and I could probably find somebody else to agree with that, perhaps even an author or something, but if there exists a body of law that is on the books and that will punish you for violating it, the idea of shareholder primacy is very much not a myth.
Dodge v. Ford 1953: > The Court held that a business corporation is organized primarily for the profit > of the stockholders, as opposed to the community or its employees. The discretion > of the directors is to be exercised in the choice of means to attain that end, and > does not extend to the reduction of profits or the nondistribution of profits among > stockholders in order to benefit the public, making the profits of the stockholders > incidental thereto.
This all extends on precedent set way back in 1896 (though there may be earlier) in Steinway v Steinway & Sons, though in the case of Steinway, the philanthropic behavior was excused as having had pecuniary value. It's been cited since, and punishments are being levied in spite of the myth. While it may be true that there is no law codified to speak expressly on the duties of shareholder primacy, stare decisis specifically disagrees with that, and that's really all that matters.
In the real world, of course there is no duty to maximize value at all costs, and the board elects a CEO who will do a good job of balancing short-term value against long-term value, and while actions such as Cook's are likely debatable either way, if we took a more extreme example, and Cook were to give 80% of Apple's assets away to charity, he would very certainly be sued, and he would very certainly lose. If, as in Steinway, the charitable actions could be argued to lead to longer term profits, the case gets blurrier, but the idea that shareholder primacy is a myth that does not exist is simply too unqualified a statement, and too counter to the facts to be regarded with much weight.
The claim I was responding to was this > "It's actually a myth that a company has to maximize shareholdervalue."
There's plenty of evidence that, myth or not, the courts certainly think that it's real, and if the courts think that it is, then it cannot be a myth.
Today, I think, it is hard to find people who think it is good for companies to be obliged to maximise shareholder value. John Kay, a British economist, journalist and author of the excellent Kay Review [2], has written very well about the problems of expansive readings of fiduciary responsibility.
[1]: Katz v. Oak Indus., Inc., 508 A.2d 873, 879 (Del. Ch. 1986) judged “It is the obligation of directors to attempt, within the law, to maximize the long-run interests of the corporation’s stockholders." In Long v. Norwood Hills Corp., 380 S.W.2d 451 (Mo. Ct. App. 1964), the court observed: “Plaintiff cites many authorities [including Dodge] to show that the ultimate object of every ordinary trading corporation is the pecuniary gain of its stockholders and that it is for this purpose the capital has been advanced.” - via http://www.professorbainbridge.com/professorbainbridgecom/20...
[2]: https://www.gov.uk/government/consultations/the-kay-review-o...
Hmmm, after much consideration, gonna go with ad hominem.
Incidentally, what logical arguments would you recommend one use against people who have rejected science as a legitimate world view?
1) You're obviously a troll with a 20 hour old account, so you feel like you need to get trolling early today.
2) You assume that people who disagree with you on some topic have "rejected science as a legitimate world view". You should try to reexamine this assumption, as you may find out it's invalid.
If the trolls whine quote Citrine (UK) or Roberts (USA) at them.
And I have used Citrine as away of keeping control of a share holder meeting.
In this case, I think he's saying that because these are politically motivated shareholders, a reasoned answer would be lost on them. Cook could have whipped out a lengthy powerpoint full of charts and figures, or he could have done the chicken dance, or whatever ... he's saying the shareholders are not asking the question in good faith.
edit - Further, saying what you would prefer Cook do if you had asked the question isn't entirely relevant, since presumably you would be asking sincerely. Cook can probably tell those guys are only there to yank his chain and make him look foolish, so unsurprisingly he was somewhat hostile in response.
Maybe to see if somebody is interested in statements of fact, you should first try having the statement of fact. And not just say "well, I could drown you in facts, but since you're not worth it, I'd just resort to name calling". That looks rather unconvincing to me.
There is an interesting dynamic here however. Let's suppose arguendo that the sustainability program is money-losing in and of itself -- buying coal-generated electricity is cheaper than maintaining a wind farm (or whatever) even after the subsidies. That doesn't actually mean it has a negative ROI, because the sustainability program is good PR. It builds goodwill that spurs purchases and evangelism. And Apple needs good PR following all that business with the Chinese factory working conditions.
So now here's the trouble. If you're doing green energy for the purposes of public relations, and some troll from the burn more fossil fuels lobby starts asking you about the numbers, you can't come out and say "the numbers don't matter because it's a PR stunt" -- that wouldn't be good PR. You have to give the line about how you run a corporation with a conscience blah blah blah, because that's the line that keeps the yuppies buying Apple hardware. If you come out and say the whole sustainability initiative is to convince Green party voters to buy iPhones made in a city with soupy air in a factory with suicide nets by workers who never leave company property, or downplay the amount of money it costs you to do it, the Green party voters will hear that and not buy as many gadgets from you. The necessary line is to play up how selfless you are in doing all of this, because anything else defeats the premise.
The ROI is, among other things, customer loyalty.
I never said I was eloquent.
Unfortunate when the word "profit" appears in text, it is often unclear which one is being referred to.
The easiest way to maximize short-term profit is to simply fire all r&d staff. Reduce expendses, sell exiting products and profits for that quarter will go up by plenty. That'll work for 2 quarters, maybe even a year, before the whole thing implodes.
Obviously we don't do that - we forgoe some of the immediate profit to gain profit in the future. But there's no guarantee that what r&d are working on will ever pay off. There's risk involved.
There are also solid reasons for doing one product, which will never make profit, in order to complement another product which will. That complement might be direct, or indirect.
Taking Tim's example of making sure apple devices can be used by blind people, that may indeed be profitable if one considers both the blind people who buy your product, and also the people who _know_ blind people who made their decision based on your blind-friendliness. This is of course impossible to measure.
And therein lies the root problem when it comes to "only doing things to maximize profits". It's mpossible to measure the actual profitability, over both short and long term profits, of pretty much anything we do. There are slimply too many unknowns.
Had Tim answered the question another way, would that impact profitability? If the question had not been asked, would that improve profitability? Given that the question was asked, and answered the way it was, does Apple gain some goodwill? Does that mean that by soundly rejecting the question it accomplished what the question asked for?
Profit is impossible to optimize for. To make profit you encounter risk. And by definition some risky actions will ultimately be unprofitable. Thus the line about companies responsibility being just to make profits, and the promise the Question asked for, is not meaningful in any practical way.
While I agree with his sentiment, I wish he took a moment to explain that pursuing environmental sustainability may actually help the top line (rather than insinuating that those goals are net negative to shareholders)
Environmental impact in particular is an endless money hole. You can always spend more money to be marginally better, and every company (and individual) has their cut off.
Apple has, what, > 10k workers? If it cost them $100 billion to prevent one software worker from getting carpal tunnel, your statement suggests that cost should be born by Apple. Similarly, if it cost the cumulative GDP of the US to prevent N amount of pollution, your statement suggests that Apple should go bankrupt preventing that pollution.
Back in the real world, I suspect we generally agree. The problem, IMO, is that companies (and consumers) aren't forced to capture the hidden costs of injuries/pollution.
I just disagree with your black and white assessment. The laws of economics mean companies have to assign dollar values to human life and safety, as much as we dislike the feeling it gives us.
They have to do no such thing. They choose to do so, and some people choose to give them a pass for it once the cost reaches a certain level.
See how enjoyable pedantry is? You knew what he meant just like I knew what you meant.
Now I'm going to try and go do something useful with my time, rather than get into obnoxious arguments.
I hope you're able to do the same as well.
Meh. Over 50% of Apple stock is owned by institutional investors and mutual funds. I for one own Apple stock through index funds and just like every other company held by those funds I don't really give a shit about the specifics.
6 years ago 90,000 were running on bunker fuel
http://www.gizmag.com/shipping-pollution/11526/
370 million tonnes of it get burned every year and the price is rising
http://mobile.bloomberg.com/news/2013-02-11/ship-fuel-prices...
The market is not very good at correcting for the future. Regulatory pressure would be the primary mechanism for change.
But again, if Apple wanted to be more regulated they wouldn't be manufacturing in China.
And while I'm all for regulation, I'm basically pessimistic. Then again, overpopulation and nuclear escalation turned out less bad than I expected, so what do I know?
I support Apple continuing to participate in these programs, but giving shareholders accurate numbers seems like a worthy goal, and I'd actually like to know the scale of Apple's investment in green energy as a benchmark for how far along the green energy industry is coming -- if it's a 100% markup, it's got a long way to go, but 25-50% wouldn't be too bad.
"The self-described conservative think tank was pushing a shareholder proposal that would have required Apple to disclose the costs of its sustainability programs and to be more transparent about its participation in "certain trade associations and business organizations promoting the amorphous concept of environmental sustainability.""
What is so wrong with that request? Forget your opinions and mine, as well as of the think tank. Asking Apple to disclose what it is spending, and where, is a reasonable request. And even if you're a firm believer in the dangers of anthropogenic global warming, you must understand that not all of the organizations doing research or providing information about it are entirely reputable. Information is good. Put it out there. Let stockholders decide.
But, it wasn't a serious request for information. That's what was wrong with the request — it wasn't one. They were trolling. And you don't feed trolls.
The more I hear about Tim Cook, the more I admire him. That was a really great put-down he delivered. There comes a point where you can't reason any further with unreasonable people and you just have to tell them to fuck off.
> During the question and answer session, however, the NCPPR representative asked Mr. Cook two questions, both of which were in line with the principles espoused in the group's proposal.
> The first question challenged an assertion from Mr. Cook that Apple's sustainability programs and goals—Apple plans on having 100 percent of its power come from green sources—are good for the bottom line. The representative asked Mr. Cook if that was the case only because of government subsidies on green energy.
> Mr. Cook didn't directly answer that question, but instead focused on the second question: the NCPPR representative asked Mr. Cook to commit right then and there to doing only those things that were profitable.
Pushing the CEO to commit to a promise to only do things that are profitable is a nice way to change the whole tone of the conversation. The NCPPR rep could've asked it differently without demanding something from the CEO.
I think the creation of value comes before Return on Investment (RoI). Creating value is much harder than showing a RoI because value is somewhat intangible and is seen through people's personal values/beliefs. Also it may take time before the value you have created makes its way to the bottom line.
Arguably Apple's brand, and how stakeholders feel about it, increases Apple's ROI for its shareholders.
Do Apple's customers care about environmental issues? I'm sure they do. If Apple ignores this it will eventually hurt Apple's bottom line. Do Apple's employees care about worker safety? Again, I'm pretty sure they do and I'm pretty sure that if Apple's management doesn't pay attention it will eventually hurt the bottom line.
Personally I like the idea of a 'Triple Bottom Line'[1] which acknowledges that businesses can create negative value to parts of society when maximizing profit (negative externalities if you are an Economist).
It sounds to me like Tim Cook internalizes this world view and uses it to steer Apple's corporate decision making. I applaud this and hope that this inspires other big corporations but also the future entrepreneurs on Hacker News.
Conservative group buys stock in Apple. During shareholder meeting asks CEO to report detailed and accurate figures regarding sustainability costs.
CEO goes off on a bit of a restrained tear, telling the group if they don't like Apple's sustainability policies they should get out of the stock.
So, since Apple fans have long been the left-leaning, creative, wine and croissant crowd, was this a paid publicity stunt? Or just simple happenstance? This kind of story is like giving away free candy. People can argue the politics of it, people can talk about the role of profit in corporate governance, people can argue about climate science. Coverage of the story just goes on and on.
Seriously, you couldn't ask for a better PR platform. I'm pretty damn close to calling bullshit on this entire story.
http://en.wikipedia.org/wiki/National_Center_for_Public_Poli...
I'm not even convinced that this wasn't, despite appearances, a prepared statement designed to re-assure stockholders.
A "think tank" demanded the world's most profitable company focus more on profitability while implicitly claiming — incorrectly — that renewable energy can't save money. Think what you will of either sides motives, but Tim Cook said and did the right thing here and that's about where we can leave it.
No, I guess we can't not be us vs them on things as tech people. Always have to play teams at all times. After all EVERYONE hates the Yankees cause they are successful. This crap crops up on every story not about actual technical things (even then) be it Google, Microsoft, or Apple, or whatever.
Gets draining to be honest, I use a combination of the above's products. People seem to want to follow some type of religious zeal to this crap.
Some days I want to just go move to a remote greek mountain and cut out my vocal cords and ears so I don't have to endure constant bickering about this junk.
/rant/squirrel mode banter off I'm going to bed.
Mr. Cook didn't directly answer that question"
It's a shareholder meeting. Answer the question. Unless the answer is embarrassing, which, without more data, we have to assume it is.
In that view, think tanks are probably the most profitable business there is. Certainly the highest ROI when it works out. Politics can be bought for hundreds of thousands, but bring in billions.
More broadly, think tanks are groups of like-minded people expressing their opinions, typically about how governments should be run. The fact that they accept donations in order to be able to work full time on the cause and to extend the reach of their advocacy, and that many of those donations come from individuals or organizations who stand to benefit if some of the think tank's desired policies are implemented, does not make them "legalized corruption".
And if you want to see the amazing ROI available through corruption, take a look at Duke Cunningham's bribe menu.
What should have really happened is that another voter at the meeting should have called move next business and have the motion dumped.
Moving next business is a very brutal way of a meeting telling some one with a not wanted motion to FO - defiantly would send the right message.
"Private"
The company obviously can't raise capital to buy itself by issuing shares, so it would have to get the money loaned to it. At this point I think it needs to convince its creditor that its stock is undervalued, and at that point the creditor is better off just buying the undervalued shares themselves. If they bought enough then they could take the company private if they wanted.
Now, maybe if someone who owned a company outright decided to donate all of their shares to the company, then it could "own itself". I don't know how that might work legally, though.