Tim Cook Rejects Politics of the NCPPR

http://www.macobserver.com/tmo/article/tim-cook-soundly-rejects-politics-of-the-ncppr-suggests-group-sell-apples-s

by sarreph • 12 years ago

289 126 12 years ago

DiabloD3• 12 years ago

Companies shouldn't always do things for profit, because doing things only for profit, well, isn't profitable. Good will has a monetary value, and it is often worth far more than just making money is.

I never said I was eloquent.

alexeisadeski3• 12 years ago

Sounds like you're saying that companies should only do things for profit - but only if it's actually profitable :)

bruce511• 12 years ago

I think he's suggesting that there are two kinds of profit. The short-term, next-quarter-results kind which fuel wall street, and the longer play when money is invested now and achieves a payback later.

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.

ericHosick• 12 years ago

It seems to me that Apple is directly investing into its brand name by doing things like planning on "having 100 percent of its power come from green sources".

The ROI is, among other things, customer loyalty.

sheetjs• 12 years ago

"If you want me to do things only for ROI reasons, you should get out of this stock."

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)

interpol_p• 12 years ago

But explaining that could almost make it seem like helping the top line justifies environmental sustainability, when really they should do it regardless of whether it helps the top line.

Zigurd• 12 years ago

That's a rathole to avoid if you can. It may sound dismissive, but these guys are cranks, and their time in the spotlight is rightly to be minimized. 97%+ of shareholders understand that Apple goes the extra mile in sustainability and agrees with that approach.

dhoulb2• 12 years ago

Completely agree. Whether or not worker safety contributes to ROI should never be a question. Same with environmental impact.

edias4• 12 years ago

97%+ of shareholders understand that Apple goes the extra mile in sustainability and agrees with that approach.

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.

SixSigma5• 12 years ago

Pfft, the extra mile. Transporting your goods around the world on coal burning ships does not an environmentalist make.

HelloMcFly• 12 years ago

Personally, I'm much more appreciate of the sentiment that not all things need to be exclusively driven by ROI. And at any rate, if you make it solely about the ROI then you open yourself up to evidence from conflicting "studies" and changing political landscapes.

coldcode• 12 years ago

What rock do these people crawl out from at night?

vacri• 12 years ago

Lignite, most likely.

Steko• 12 years ago

Came for the comic sans, stayed for the delicious irony of a think tank run on outside donations complaining to the most profitable company in the world that they aren't focused enough on ROI.

spacehome2• 12 years ago

The think tank is pushing somebody's agenda, and even though the think tank as an organization isn't profiting, I'm sure the officers are doing quite well for themselves.

nikster• 12 years ago

Isn't a think tank basically the same as lobbyists, e.g. legalized corruption? Think tanks push an agenda, which creates laws beneficial to the business interests of the think tank's backers, which creates $Bns in profits.

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.

JohnTHaller• 12 years ago

Calling them a 'think tank' implies there may be actual thinking going on. They are anti-science climate change denialists, so 'think tank' is being overly optimistic here.

mikestew2• 12 years ago

"<Tim Cook> said that there are many things Apple does because they are right and just, and that a return on investment (ROI) was not the primary consideration on such issues"

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.

MichaelGG• 12 years ago

That line about legal obligation doesn't even pass basic analysis. Who is to say what maximizes value? Contributing to open source creates a good name, but does it harm the company by helping competitors?

It's such an idiotic line and is usually given as a poor substitute for reasoning about a company's actions.

edias4• 12 years ago

It's not an idiotic line, it's just incomplete. They have a legal obligation to their shareholders demands, whether that be profits or otherwise. That is a simple fact that can't be disputed. It just happens that for most public companies, shareholders wan't short term profits.

selmnoo2• 12 years ago

Yeah because that's just what we need, another asinine interpretation of an event in which the CEO was basically hand-tied to do one thing: not fuck up PR. And let's just ignore the legal precedents where companies were sued for their philanthropic work, and indeed lost. (see the many court cases in which courts end up ruling that companies are not allowed to engage in purely philanthropic duties when there is a rigid fiduciary responsibility to maximize profits; see eBay vs. Craigslist).

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.

IBM• 12 years ago

Good news, he has!

http://arstechnica.com/apple/2011/09/the-post-jobs-era-tim-c...

http://news.cnet.com/8301-13579_3-57370922-37/apple-ceo-tim-...

mikestew2• 12 years ago

(see the many court cases in which courts end up ruling that companies are not allowed to engage in purely philanthropic duties when there is a rigid fiduciary responsibility to maximize profits; see eBay vs. Craigslist).

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.

edias4• 12 years ago

companies are legally obligated to maximize profits/shareholder value

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".

PeterisP• 12 years ago

And do note that in this particular case, when the shareholders voted on their demands, the NCPPR position got less than 3% of the votes - so in reality it's not like the majority wants short-term profits above everything else.

return0• 12 years ago

Yeah, that will show them.

peterkelly• 12 years ago

Apple's sustainability efforts (and other things like support for blind users) can be seen as being in the interest of profits.

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.

smsm428• 12 years ago

If only Tim Cook said that instead of saying "I don't consider the bloody ROI, and if you don't like that, divest". There's a legit approach of going short term, and it may be wrong, and if it is wrong, it can be explained why it is wrong - just as you did. Or it can be shouted down - because how dare those neanderthals ask us questions? I'd rather like to live in a climate where questions get answered, not shouted down.

marcusr• 12 years ago

This is often discussed in the UK, here's one such article: http://www.telegraph.co.uk/finance/financetopics/10183004/Pr... but the conclusion is that a UK company at least should promote the success of the company, and that isn't all about pure profit.

k-mcgrady2• 12 years ago

> 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.

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.

aragot• 12 years ago

IS MAXIMISING SHAREHOLDER VALUE

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=

fdschoeneman2• 12 years ago

Wait a second. From the lede:

"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.

sc68cal• 12 years ago

Because it's concern trolling - they do not offer these proposals to actually get the information - they are looking for ammunition to stir the pot.

fdschoeneman2• 12 years ago

Like I said, forget their opinions, but also forget their motivations. What is wrong with the request?

mikhailt• 12 years ago

The angry Cook wasn't responding to the proposal but to the NCPPR rep who asked questions with the intention to stir the pot after the board already rejected the proposal.

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.

bluthru• 12 years ago

Also, it's not like Apple's out there on their own investing in renewable energy. Intel, Google, and other tech companies are quite mindful of their environmental impact.

sramsay• 12 years ago

I'm pleased that Tim Cook said this, but Apple has been marketing itself as the manufacturer of counter-cultural hippy objects for anarchic outside-the-box geniuses for decades, while at the same time behaving like any other RoI-driven capitalist enterprise -- worse than most, in my opinion.

I'm not even convinced that this wasn't, despite appearances, a prepared statement designed to re-assure stockholders.

mrcwinn• 12 years ago

The world gets far too complicated if we not only choose to respond to events, but also attempt to assess the motives of the parties whose minds we can't get inside of.

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.

mitchty• 12 years ago

Could we once, not have to play favorite sports team with companies and enjoy a CEO talking down a shareholder that is trying to play politics? Of course not, now we need to play into conspiracy theories that this whole thing was a prepared statement by Apple.

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.

doktrin• 12 years ago

Good for Tim Cook. This was an appropriate response.

rdl• 12 years ago

All things being equal, I'd like it if Apple provided these numbers to shareholders/the public.

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.

honksillet• 12 years ago

I agree. Regardless of what one think about the questioner, I would really like to know the answer to the first question.

gress4• 12 years ago

It might be a worthy goal, but it might also be destructive to shareholder value if it results in shifting attention to green politics and a nasty battle with climate change deniers.

rjknight• 12 years ago

I understand and agree with the idea that companies should maximise shareholder value, but I've never understood the argument that shareholder value is exclusively determined by profit. As I see it, the stock market consists of various firms saying "buy our stock, and we will try to achieve X with your investment", where X might be maximum ROI, but I don't understand why it has to be. If I want to found a company which has some goals other than making a profit, and so long as I am explicit about this then nobody is being cheated or defrauded, the investors are getting exactly what they signed up for.

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?

nickff• 12 years ago

It is also possible that Apple might maximize profit and shareholder value by pursuing philanthropy, if customers see the charity as adding value to the products (, possibly in improved brand image).

mongol• 12 years ago

"Future philanthropic principles" are probably not for the CEO to decide. It sounds like something for the board. However I agree that a company should be able to define its mission and include things apart from maximum profit.

bowlofpetunias• 12 years ago

However, this is not necessarily "philantropic". It's marketing, and directly connected with ROI.

If Apple had the social and environmental sense of responsibility of GoDaddy, I lot less of us would feel comfortable buying Apple products.

eropple2• 12 years ago

It's only for the board to decide if the board isn't comfortable granting that responsibility to the CEO. They obviously are. If some climate change deniers want to get buttmad about it they'd better buy a lot more stock.

chalst2• 12 years ago

The fiduciary duty of the directors of a company entails that they make no decisions that prejudice the general shareholders of a company. The classic case is making an issue of equity that benefits only a limited group who can buy it at the expense of diluting the value of the equity of other shareholders.

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.

jvvlimme2• 12 years ago

It's actually a myth that a company has to maximize shareholdervalue. There is no corporate law even remotely suggesting it and it is generally a horrible idea.

http://www.washingtonpost.com/opinions/harold-meyerson-the-m...

babesh• 12 years ago

That is the business version of the Nuremberg defense.

mathattack• 12 years ago

The complicated part is owners who try for higher ROI buy shares away from holders with lower expectations. This is a challenge for capitalism as it encourages Tragedy of the Commons.

smsm428• 12 years ago

If Tim Cook would actually say "yes, our green energy project has costed us N dollars so far, and it is a good thing because that's what we do and because government actually pays us back M dollars of it with that sweet taxpayer money" - that would be free market. Well, except for the taxpayer money part, but that's hardly Tim Cook's fault. Instead, no actual information was given, and people asking wrong questions were told to shut up or get out of the investment. I'm not an Apple shareholder (except as part of broad index funds) and probably never will be, but if I were, I'd like my executive to be more open and ready to answer hard questions than that. Of course, the swooning of people who had their cause supported would probably bring Cook much more in feel-good PR than actual transparency would bring him. So, the irony is he's probably doing what's good for the ROI, but not in the way his fanboys may think or like.

keeshawn3• 12 years ago

These are climate change deniers... I don't think they are really interested in statements of fact.

AnthonyMouse• 12 years ago

I'm not an Apple shareholder (except as part of broad index funds) and probably never will be, but if I were, I'd like my executive to be more open and ready to answer hard questions than that.

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.

discreteevent• 12 years ago

Tim Cook shrugged.

icu• 12 years ago

For me this article highlights the tension between long term value creation and the short term quarterly profit perspective of Wall Street.

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.

[1][http://en.wikipedia.org/wiki/Triple_bottom_line]

zacinbusiness3• 12 years ago

I think it would be awesome if Apple could somehow go "unpublic." Is there a word for that? Buy back all of their stock and dissolve it. A powerhouse of design and engineering like Apple would be a real force if it didn't have to blow their asshole investors each quarter or risk some kind of coup.

dredmorbius2• 12 years ago

Is there a word for that?

"Private"

zacinbusiness3• 12 years ago

It's 6am. Also I'm a dumbass sometimes. But thank you :-)

lotsofmangos4• 12 years ago

That's what Dell just did.

amirmc• 12 years ago

And Richard Branson's Virgin Group. Also, DeBeers diamond business, I believe.

repsilat• 12 years ago

A company can't buy itself, at least in cash. The cash reserves of a company are (or should be) worth less than the company itself.

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.

zacinbusiness3• 12 years ago

Could a company create a second business (I'd go with Apple ][) and then have the second company just buy the original company for like a dollar? I'm assuming there are legal reasons why that can't happen.

Tycho• 12 years ago

I would like to know actually how much of Apple's sustainability projects involves government subsidies. Oh well.

JDulin• 12 years ago

The climate change versus shareholder value debate aside, I would be angry that this representative was obviously trying to hijack the shareholding meeting discussion to make a political point or have me (Tim Cook) say something polarizing. They got the latter, but not in the form they hoped for.

smsm428• 12 years ago

I think Tim Cook is ready for a run for Congress. It's classic politician - "we're doing the right thing, and we're not going to disclose to you how much it costs you to do it, because it's the right thing, and if you don't like this just STFU and GTFO". Indeed, what the gall has the shareholder to ask the executive how much the policy costs him! One should soundly reject this novel and outrageous concept of executives reporting to shareholders the actual results of their pet policies. The less shareholders know, the better. Especially when it comes to the question if the decisions taken by the management rely on public subsidies - shareholders don't need to know if their wellbeing depends on taxpayer-funded handouts, that would only disturb them. Just trust the Supreme Leader, he's doing the right thing.

paul_f2• 12 years ago

"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"

It's a shareholder meeting. Answer the question. Unless the answer is embarrassing, which, without more data, we have to assume it is.

gress4• 12 years ago

Assuming it is embarrassing is a baseless attack on Tim Cook. We could equally assume that it was an irrelevant line of discussion that would allow extremists to distract the meeting from important business. This was a shareholder meeting, not a trial.

DanielBMarkham• 12 years ago

So let me get this straight:

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.

ceejayoz• 12 years ago

It's pretty unlikely that the NCPPR would be willing to help Apple with a pro-environmental PR stunt.

http://en.wikipedia.org/wiki/National_Center_for_Public_Poli...

walshemj2• 12 years ago

Go Tim - Its true what they say about the quiet Englishman OK IDS is the exception.

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.

Tim Cook Rejects Politics of the NCPPR

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