What would you do, as the owner of a company, if the manager you hired to run it rebuked your desire for the highest return on investment? Imagine that you approach your manager with concerns about his performance, and he tells you to stop worrying so much about profit.
Apple CEO Tim Cook did precisely that in a meeting with stockholders at the company’s Cupertino headquarters. Mashable reports on the confrontation with a group of stockholders objecting to Cook’s wasteful spending on environmental initiatives:
“We do a lot of things for reasons besides profit motive,” the CEO said:
We do things because they are right and just and that is who we are. That’s who we are as a company. I don’t…when I think about human rights, I don’t think about an ROI. When I think about making our products accessible for the people that can’t see or to help a kid with autism, I don’t think about a bloody ROI, and by the same token, I don’t think about helping our environment from an ROI point of view.
Anyone who had a problem with that approach? They should sell their Apple shares. “If you only want me to make things, make decisions that have a clear ROI, then you should get out of the stock,” Cook said to applause.
Emphasis should be placed on that applause. Stockholders went on to vote down a proposal to halt environmental efforts which hurt the company’s bottom line. In other words, stockholders voted against making money.
The episode evokes comparisons to Ayn Rand’s Atlas Shrugged and the character of James Taggart, heir to a railroad company who squanders his inherited wealth on altruistic efforts which ruin both his company and the national economy. Like Cook, Taggart believes business should be motivated by more than profit. Like Cook, Taggart believes business holds some responsibility to help people.
It’s a view Apple founder Steve Jobs did not share, as reported in The Economic Times:
CEO-author Walter Isaacson, who wrote Steve Jobs’ eponymous, [authorized] biography, says the iconic co-founder of Apple Inc didn’t believe in throwing his money away in charity and instead thought his products would help people live better.
“(While writing Steve Jobs) I asked him about charity. He said that he would be able to do more to reform education, for example, by creating an iPad that had interactive textbooks than by being a philanthropist giving his money away.
Jobs recognized that wealth creation was life-giving. The value which Jobs created through his company dramatically improved the quality of life for hundreds of millions of people now living and billions more yet to be born. That value was not created by giving money away or throwing it down some environmental rat hole, but by seeking innovative ways to produce more at the least possible cost and provide the highest return on investment.
Cook, by contrast, has declared himself a destroyer of value. He has defied the very purpose of his position with Apple, and told its owners that they should not expect efficient production of value.
This leaves those Apple stockholders who would prefer their CEO fulfill his fiduciary responsibility with a choice. They can accept his stance in light of their minority ownership status and earn less than they otherwise could. They can sell their stock and thus shrug off Apple. Or, they can organize to bolster their ownership position and work to oust Cook from the company.
No matter Cook’s fate, the fact that his value-destroying stance earned applause bodes poorly for the future of Apple. Mashable sums up the situation unwittingly:
So far [Cook's] legacy is largely comprised of incremental improvements in established products, tweaks to the supply chain, and more corporate transparency.
But Cook does care about the environment…
Care for the environment will not sustain the brand Jobs built.
Updated: see Stephen Green’s dissent: Tim Cook as James Taggart?