I am in no position to tell Apple how they should spend their money but after reading the articles about Elon Musk today I can't help but imagine how the world could be changed to become a better place with all this money.
And I don't mean that Apple should give money away to charities.
Why not invest in space exploration , electric cars, self-driving cars, medical devices, green energy,... It is not Apple's core business, but "phones" have not been the business of "Apple Computer" as well.
Apple has moved humanity forward with the personal computer and mobile phones. I don't want them to stop with computers, smartphones, tablets or TVs.
I want Apple to aim for more than just consumer electronics - but I guess we won't see that happening.
"Why not invest in space exploration , electric cars, self-driving cars, medical devices, green energy"
Why should they? Just throwing money at something doesn't guarantee success, and deviating from a company's core competencies can become a distraction that drags down the parts of a company that are succeeding. The dividend puts money back into the hands of investors that can choose to either re-invest back into Apple stock, or invest in companies whose core competency is space exploration, electric cars, or some of the other areas that wouldn't be in Apple's expected domain.
That's true, but the shareholders have delegated the decision on how to spend the money to their legal representatives on the board. There's a strong presumption that the shareholders have elected board members whose decisions they support, so if the board makes decisions and the shareholders don't vote them out, those are presumed to express the preferences of the shareholders. Note that those decisions do not have to maximize shareholder profit. Shareholders can elect board members who commit to maximizing shareholder value, but they can also elect board members with a variety of other preferences and ideas about how to best run a company, or how to best spend its cash on hand. The board can legally pursue a wide range of strategies, and shareholder lawsuits basically never prevail (in the U.S.) absent some kind of overt wrongdoing, like secret side deals made by board members or something like that, or else shenanigans related to mergers and equity (e.g. some kinds of dilution).
I tend to think of it as the board being in possession of the company that the shareholders have all but signed over to them; with shareholders retaining notional ownership, mainly enforced via the rarely exercised right to revoke the delegation of power if they get sufficiently angry.
So, the clarity you've added here is neat (I hadn't drilled down into the specifics of what "fiduciary duty" meant in law, and also had been using "maximize shareholder value" as a shorthand for it), but if you search, you'll find lots of instances of boards being sued for breaches of loyalty over company business decisions. Courts seem to find lots of ways to connect the dots between "putting the interests of the corporation first" and "not signing off on dumb business decisions, like giving the CEO a huge raise in a year where the company missed its numbers".
Regardless; Apple is not going to space, at least not until it can figure out how to make money doing it.
Board members and executives have a fiduciary duty. Executives and board members who knowingly and willfully undertake actions that decrease the value of the company can be held personally (financially) responsible for those actions. (That's why you purchase director's and officer's liability insurance.)
They have an extremely vague "duty of care", i.e. to run the company in a manner in accordance with the wishes of the entities they serve as representatives of. Beyond that, they don't have any specific obligation; shareholders can, at least in principle, have many different wishes, and so elected board members can represent a variety of positions, from an aggressive profits-uber-alles position to some kind of safeguard-the-brand-reputation-for-generations viewpoint.
The main enforceable obligation is a negative one, to not actively do things that benefit themselves at the expense of the corporation they oversee, e.g. by making decisions primarily designed to enrich themselves personally. Almost anything that isn't active wrongdoing is defensible though; if a board member thinks in good faith that doing X would enhance the goodwill towards the Apple brand, and in good faith thought that prioritizing brand goodwill was the best long-term strategy, it would be fine to undertake a short/medium-term money-losing course of action to pursue the strategy. Courts generally defer to board elections to resolve those kinds of disputes over strategy, since courts are very bad at predicting whether a given strategy is actually in a particular entity's long-term interests.
Insurance these days is more often directed at government regulations than shareholder lawsuits; board members have various possibilities for personal liability if their company is doing illegal things on their watch.
That is to stretch the definition of ownership quite a lot. Share holders have no rights to or control of any portion of the cash balance of a company that are not granted to them by the board.
The board represents and has a fiduciary duty to the shareholders. The term "fiduciary duty" is not abstract; it has legal force, hence the frequency in the news of another investing term: "shareholder's lawsuit".
I think they're saying that it's the shareholder's money, which is absolutely true.
However that doesn't preclude them from doing good with it, even in money-losing investments, beyond perhaps shareholder revolt ousting the board. There's an oft claimed belief that corporations are somehow bound by corporate law to do everything in their abilities to increase profits/returns for their shareholders. That is not and has never been true. Corporations are essentially mini-democracies, albeit where your say is scaled by your ownership: If the shareholders don't like it they have mechanisms to deal with it.
Nothing prevents the shareholders from taking the dividend and investing it in cold fusion or flying cars. Then you don't even need to take a vote. You just give people their money and they decide what to do with it.
that's not true. it is their money - the shareholders probably just wouldn't like the move and as a result, apples stock price would plummet (but that doesn't really need to bother them - it's not like somebody's just gonna buy the currently most expensive company in the world). however what would bother me more as an investor would be that apple apparently has no idea what to do with all that money (how about expanding R&D even more, like microsoft? and develop the next gen input devices (after touchscreens))
Oh yes it better bother them. Cook and the Board have a fiduciary duty to the shareholders. They can't just go spending money however they want without regard to shareholder wishes or stock performance.
The shareholders of Apple are the owners of Apple. They get the final vote in the end, although it has to be translated through boards of directors and management.
The Apple Board of Directors has a fiduciary duty to investors. If they take action that causes the share price to fall dramatically, thereby losing investor value, you can be pretty sure the Board will not last very long so yes it would matter.
A company? We're talking about Apple. I doubt Steve Jobs would have been caught dead saying that about Apple, and I hope that culture is continuing with Apple. Apple employees, notably Ives, have said over and over that their #1 goal is to create <magical products>.
I would say this is quite a lot of hyperbole. They have refined what others have made but they have not moved humanity forward.
The Haber-Bosch process, Norman Borlaug, the space race, the production of a silicon chip etc have al moved humanity forward. Apple in comparison made some trinkets.
You could argue that they have moved humanity forward in the sense of setting the bar higher for the sort of experience that people expect with everyday things.
Of course they are not primarily a science/research company so they rely on "standing on the shoulders of giants".
Maybe Apple doesn't feel they can be successful in areas other than consumer electronics. Trying to get into another line of business would be a HUGE distraction for management as well as the employees.
As for your green energy comment: I think Apple can do far more to promote green energy by being a customer and driving partners to produce better products than designing their own green business. For example, by buying a shitload of fuel cells for their datacenters, Apple funds Bloom's (or others') R&D efforts. Same with solar panels and other alternatives.
Because Apple's duty is not to pursue community goals. Furthermore, they don't have the competence to make those sorts of investments. Apple is not a philanthropic organization, and it would be to everyone's detriment if they were to act like one.
Apple has been successful so far with a very careful strategy: they focus on just a few markets at a time, only enter new markets if they have a big competitive advantage in those markets and only release new products if those products are a big improvement on the prior status quo.
If they were to spread management attention more thinly by starting separate divisions to do the sorts of entirely unrelated things you describe, Apple could easily turn into IBM or Microsoft. At its heart, Apple is a small company. The main way Apple helps all those other industries is by training engineers to think in the Apple way who then go off and found start-ups of their own. And by making lots of millionaires to fund those start-ups.
(Apple's also investing in some of those industries as a customer. For instance, they invest in "green energy" by buying solar panels for its new HQ building.)
At some level it's necessary for a company as tight and as focused as Apple is to maintain a cohesion in its corporate expanse. They could easily spend their money on growing the company in a myriad of ways. They could invest in pharmaceuticals or unicycles, but the farther afield they get from their core competencies the less likely they are to succeed, and the less likely they are to remain a single, cohesive company.
At the end of the day the key question remains: what is Apple other than just a big ol' wad of money? If Apple is something other than just an amalgam of various profitable enterprises then they should keep on being that instead of trying to be something they're not.
> but "phones" have not been the business of "Apple Computer" as well.
I don't think of the iPhone as a phone at all. It's a computer I always have with me.
Now, the main reason I always have it with me is because, rather than being an additional thing I need to carry in my pocket and always remember, it replaced a thing I need to carry in my pocket and always remember, but the "Phone" feature is the least used feature of my iPhone by far.
This is how Apple approached the iPhone, too. It was initially thought of as an iPod that had the sweet feature that it could replace your phone rather than require you to carry an extra device.
I guess we can ask which other sectors they could disrupt.
Education seems like a perfect fit. They could start their own publishing house to author first-rate dynamic textbooks for the iPad. The content could be better than it is in current books, and it would sell iPads to boot.
Why are you so dismissive? Apple is not the only company that has done this.
Many companies had MP3 players prior to the iPod, but it was Apple's device that completely up-ended the music industry. Now people have access to entire libraries of music on their phone, and a store where they can buy even more.
Can you really say the situation would be better if Apple had blown out in the 1990s and we were at the mercy of Rio and RealPlayer?
I disagree. But it's interesting that you mention Alexander Fleming (it's one m in his name, btw). Fleming actually has some similarities to Apple's role in technology.
Fleming discovered penicillin and its effects, but he abandoned the discovery because he was unable to produce it in quantity, and also did not believe it would last long enough in the human body to cure infections.
It took the work of several others, and fifteen more years, to actually produce an effective drug.
Similarly, those who made various fundamental discoveries and inventions in computing are certainly significant and worthy of attention, but Apple also deserve much credit for making easy-to-use, refined products out of these discoveries, especially over the last ten years.
Giving people better tools makes them more productive in whatever endeavors they pursue. It would be short-sighted to not see Apple's value to society.
And I don't mean that Apple should give money away to charities.
Why not invest in space exploration , electric cars, self-driving cars, medical devices, green energy,... It is not Apple's core business, but "phones" have not been the business of "Apple Computer" as well.
Apple has moved humanity forward with the personal computer and mobile phones. I don't want them to stop with computers, smartphones, tablets or TVs.
I want Apple to aim for more than just consumer electronics - but I guess we won't see that happening.