Who Do Apple Directors Work For?

There is always an inherent conflict of interest for boards of directors. Their ethics say they work for the shareholders. The reality is they work for management.

Those interests are not the same. What managers want is what Samuel Gompers wanted in the heyday of the labor movement. More. What shareholders want is, roughly, the same. They want the value of their holdings to increase. They want cash dividends. They want the company to prosper.

After Steve Jobs died, Apple (AAPL) PR publicly bragged about the quality of its board, about its independence from top management. I criticized the companyfor letting the board take command like this, but for now let's take them at their word.

Jobs was the company's co-founder, and a very large shareholder. (He never had the stake in Apple Bill Gates had in Microsoft (MSFT) because Apple was VC-funded from its birth, and he sold many Apple shares after leaving in 1985.) Everyone in the company was beholden to Jobs. What Jobs wanted, Jobs got.

But with Tim Cook as CEO, and the board under an outsider, circumstances have changed. The board now claims to work for the shareholders. What the shareholders want is a return. That's not what Apple is giving them right now.

The answer, as noted by many commenters here and elsewhere, is obvious. Institute a dividend. Stop hoarding cash in banks where it's only going to depreciate. Give some to shareholders and let them put it to work elsewhere.

A dividend would bring in yield investors. It would raise the company's PE from its current 13.72 to as much as 15-16 or more, which would more than pay for said dividend. By constantly increasing its cash holdings and not making a major acquisition, Apple is telling investors it has no better ideas than they do about using their money.

So why not give some back? Even the ideas offered by TheStreet – buying Wolfram Alpha, buying more patents, buying MySpace, even buying Fusion I-O (FIO) – would barely make a dent in it.

So c'mon Apple board. You say you work for us now. You've got a ton of money just sitting there. How about giving us a taste?

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.