I think the board is well aware of market capitalization!
I think a company’s ownership structure and whether it puts customers first are independent. Privately held companies, especially those owned by private equity firms (case study: Sears and Hudson’s Bay/Saks Fifth Avenue), often have a laser focus on extracting money for executives and backers that goes far beyond any public company. Nationalized and government-run firms are commonly corrupt and highly inefficient.
In Apple’s case, it’s also important to remember its gigantic, global scale and reach. “Nickeling and diming” doesn’t do much to impress investors who use Apple’s sales and profits to determine their Apple holdings. It takes a lot of money to move the needle on a company with multi-billions in annual revenue and income.
There are also many reasons why shareholders own Apple stock. Yes, some hold it in anticipation of share price increases. But others, including index funds and index ETFs, must buy AAPL because it is part of a benchmark (example: S&P 500, MSCI World) or as part of a diversification or hedging strategy.
So I regard how management runs a company and the internal culture it cultivates as much more important for customer focus than whether a company has a listed stock.
I think this would only be the case if a company consisted only of its operational side and executives concerned with its operation.
But that’s not the way most publicly traded companies work. In most of these, the executives serve at the pleasure of the board. And the board represents the shareholders. They have a vested interest in making sure the stock price increases and they pay dividends, etc. Basically their goal is to extract as much money from their customers as possible. If that happens through a superior product that’s a beneficial side effect (and fortunately for us it does work in many cases), but the great product is by no means the declared goal, in spite of all the lofty marketing BS corporations like to trumpet.
Now there are boards that are not obsessed with constantly outgrowing the market and returning as much dividends as possible. But even where such boards do exist, they are under constant threat of being usurped by new stockholders that come in specifically because they believe this is a goose that is too fat not to be plucked.
For a recent example, just look at SW Airlines. I’m not one of their customers or fans, but I think it’s fair to say they did things in a somewhat different manner compared to their rivals and that to the great joy of many of their loyal customers. But that didn’t drive in as much profit as some people believed they could extract from said business. So a group of these people swooped in, bought a whole bunch of shares, forced the board to be restructured according to their fancy, and then promptly had new execs change the way the company works. Now SW is just becoming another mediocre US carrier, perfectly exchangeable with some of its rivals, but many of its loyal customers are p/o’ed because they lost the one carrier that did things different, the way they preferred. But the stocks are definitely expected to grow as revenue is expected to increase sharply with these new revenue driving measures in place.
That’s the theory behind corporate governance. But many, many companies—Apple is a prime offender—have boards that are designed and filled to cater to the CEO’s will or to add celebrity-driven glitter and publicity or to provide political connections. Or all of the above.
In SWA’s case, I believe the changes in the way it operates was driven by the departure of a long-serving, very hands-on founder several years ago. A similar situation is underway at FedEx and, maybe soon, Oracle.
Share price is very important for a company like Apple because it affects hiring at the executive level. Those hires are often given bonuses or incentives of stock, and the stock price greatly changes a person’s ultimate compensation.
If Apple wants to hire an AI specialist and offer them stock options, and the person is being courted by Meta or Anthropic or whoever, Apple needs their share price to be going up to make their deal sound attractive (especially when other smaller companies might be doubling their value every year or two).
This is probably one reason why we’ve been hearing about Apple employees (especially in AI) being poached by other companies lately, as Apple’s stock has been relatively flat lately.
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And the board is typically up for election every year by the shareholders. If the company does poorly (by whatever measure is relevant to the shareholders), they can and will vote “no” when the member is up for reelection.
It doesn’t happen very often, but malfeasance to the level that make such dismissal necessary also doesn’t happen very often.
Yes, with the addition that institutional investors dominate board voting for virtually all large market cap companies, such as Apple, so the vast majority of votes simply go along with whatever management recommends. The only exception is if an activist investor with huge holdings or a big pension fund decides to get rid of somebody.
Another common, management friendly tactic is to either hold board elections once every several years or to only have 25% or 50% of the board up for election in a given year.
Adding to board ossification and non-independence is the dual class of shares used by companies such as Alphabet (Google) and Meta (Facebook). Non-insiders essentially have no say in board composition or other matters on proxies because the insider class has more voting power than the non-insider class.
They vote according to who they think will make them the most money. Which is what fund managers are expected to do.
You may prefer that they make decisions based on ideology instead of profit, but you can be certain that any board that tries this would be voted out in a heartbeat.
Actually, most outsource the decision to an advisory firm. These firms rarely deviate from management guidance.
If you are interested, a classic—and entertaining, believe it or not—book about how boards behave and how leveraged buyout/private equity firms change companies is Barbarians at the Gate (Burrough and Helyar).
I would prefer they make decisions on what’s best for their customers.
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Simon, I agree about the Mac - which is why Apple needs to spend more on advertising that product line. Way too many ads for iPhone and only a token ad for Mac once in a blue moon. This needs to change!