Valuing Stakeholders Not Stockholders, Apple Becomes Most Valuable Company Ever

In case you missed it, Apple’s stock price closed yesterday at $665.16, giving it a market cap of $623.51 billion dollars. (All figures USD)

Earlier in the day, when it passed $664, Apple became the most valuable company in history, when measured this way (and, pretty much any other way as well…)

I will admit, given my past comments here, and here,  that there is a certain irony in using Apple’s market capitalization to make a point.

However, since this is the language spoken by those who worship this particular god, I hope you’ll allow this indulgence.

So why, you ask, is this on The Wary Lemming?

Because there are lessons to be learned here.

It underscores that point I was making about Papa John Schnatter, who’s main concern, when wrestling with the inevitable “Obamacare”, was the continued maximizing of shareholder value – while ignoring the stakeholders.

And when you care primarily about shareholder value, your business philosophy reflects this. You put making a profit as your top priority, above good products and good services. You squeeze and cut at the expense of quality and on the backs of your emplyees to keep your share price up and to pad your own wallet. You feed the beast and starve the baby.

This has been Business 101 since we gave up the “retain and reinvest” practice of business, moved on to “downsize and distribute” and finally ended up with Papa John’s example of “our share price is job 1″.

Apple proves, definitively that not only is this wrong headed – it is wholly unnecessary. From 1995, Apple under Steve Jobs adhered to most of the principles of retain and reinvest, including no dividends, no stock buybacks and no leveraging. *

Build insanely great products, and everything else will follow.

It is a well reported fact, that under Jobs, Apple did not care about shareholder value. Jobs, while admittedly a master salesman, really did focus on making great products.  He cared about the stakeholders – the customers and the employees. He cared about bettering society.

Jobs flaunted his lack of concern about the stock market regularly, as was well reported, with quotes like “the press and the stock price will take care of themselves”, and it irked many on Wall Street.

But they bought the stock anyway.

There are many who downplayed Apple’s statements about creating great products for their customers as disingenous spin, spun by a master weaver of sales. But one only had to look at the products themselves and then to Apple’s actions as a company, to realize that they were wrong.

Apple makes best-of-class products at a great profit. They provide best-of-class customer service, their products are best-of-class in reliability. They have a loyal customer base that is second to none and while there are undoubtedly some disgruntled employees within such a  large company, there are very few running off to greener pastures.  They reward hard work appropriately.

Apple has done more to advance working conditions in their suppliers’ Chinese factories than any other US company.  They were doing this long before the New York Times tried to paint them with the same brush as everyone else. And, they have continued this focus, quietly, without overt PR, because it is the right thing to do. It is in their DNA.

An American success story from top to bottom, like Edison and Ford, and a template for corporate philosophy. All without worrying about shareholders and instead – focusing on the stakeholders.

Wikipedia defines stakeholder value as:

“the intrinsic or extrinsic worth of a business measured by a combination of financial success, usefulness to society, and satisfaction of employees, the priorities determined by the makeup of the individuals and entities that together own the shares and direct the company.”

Add loyal, happy customers and it sure sounds like Apple to me.

Ask yourself this:

If more companies focused on pleasing their customers as Apple has, what kind of economy would you have?

If more elected officials followed the same premise and focused on providing you the best product possible, their representation, what kind of country would you have?

That’s one experiment I’d like to see carried out on a large scale.  And we have Apple to thank for proving it works.

It’s time to “Think Different”

 

* (Yes, Tim Cook has instituted a small dividend now, but not at the expense of the core business philosophy at Apple.  And, I would argue that this milestone in Apple’s history was achieved due to years of direction by Steve Jobs.)