It is not whether someday Apple shareholders will wish they had a more robust corporate governance regime. It is only a matter of when this will occur, and at what price.
There is a widely held consensus, made all the more vivid as the company’s stock pushes past $300 a share, that Apple Inc. is an amazing success story whose vision has transformed the way we hear and communicate with much of the world. We share that view. But we also have long held on these pages that Apple remains an under-governed and poorly directed company that needlessly places continued success at risk.
We were the first to spotlight the absence of women on its cozy six-member board (it has one now) and the fact that its chairmanship, which is informally held by Steve Jobs, has never been properly documented. The board meets infrequently and there is no reasonable way such a small number of directors could properly discharge their duties serving on Apple’s various committees, especially on top of the other outside roles most board members have. Three of Apple’s five outside directors serve as either chairman or CEO of other companies and sit on additional boards as well. Steve Jobs remains synonymous with Apple and a key to its success. Despite much ballyhoo about having others who could fill his shoes when he took his medical leave a few years ago, this is widely viewed as wishful thinking. The board has done little to show that an active succession plan is in place.
This style of corporate governance may be suited to a fledgling business located in a garage. But when it comes to one of the most highly valued companies by shareholder capital ($278 billion by today’s count) in North America, a higher standard is surely advised.
Why is Apple reluctant to adopt the corporate governance reforms enacted by so many companies? One reason may be that it has the same mindset about the company’s own vulnerabilities that it applies to its computers. Antivirus software, it is widely asserted by Apple aficionados, is for all those other millions of computers operating on the Windows system. Few viruses ever affect Macs, so they say. That’s more than a bit of wishful thinking, too, as there are dozens of other ways in which Mac computers can be compromised, as anyone who has had an encounter with malware or phishing exercises will attest. More likely, though, it’s probably just plain old hubris — the imposter of triumphant success that has seen the demise of great leaders and mighty institutions for thousands of years. There is little that is permanent about success, except the universal principle that success is never permanent.
It is not whether someday Apple shareholders will wish they had a more robust corporate governance regime, led by a larger and more engaged group of independent directors. It is only a matter of when this will occur, and at what price. Behemoths that did not take corporate governance, among other matters, seriously, have been struck down to pitiful shells before. Some, like General Motors, rise again — but never to their previous dominance. Others, like Enron, WorldCom and Penn Central Railway, vanish altogether.
It should not take the prospect of a Titanic disaster to realize that with every surge upward to yet more dizzying heights in its stock, Apple’s investors have also begun to move into some very perilous waters.