Business Week Says Apple's Board Is One Of The Worst

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    Posted: 27 September 2002 01:35 PM

    BusinessWeek has published a report that labels Apple’s board as one of the worst.  Reuter’s puvlished a report based on the Busines Week report (strange, that), but didn’t include the reasons that Apple’s board was so named.

    If someone with a subscription to BusinessWeek could post (only) the Apple-relevant information from that article, it would be dandy.  The bit from Reuters says:

    [quote author=“Reuters”]Apple Computer Inc. (NasdaqNM:AAPL - News) Chief Executive Steven Jobs not only has the dubious distinction of having his company’s board named as one of the worst, but he is also a director of Gap Inc. (NYSE:GPS - News), another company that made the same list. The two companies are among eight listed in the Oct. 7 issue of BusinessWeek as having the worst boards of directors.

    The magazine used criteria such as board independence and stock ownership for the listing. BusinessWeek surveyed 51 corporate governance experts and then conducted a proxy analysis that graded companies on governance and performance measures.

    Gap made the list, BusinessWeek said, for deals that included construction contracts with Chairman Donald Fisher’s brother and a consulting deal with his wife.

    Apple declined to comment on making the list and a representative of Gap could not be reached for comment.

    Again, having BusinessWeek’s criteria on hand will help make this discussion a bit interesting, but what do you think?  Is Apple’s board a rotten one?

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  • Posted: 27 September 2002 02:47 PM #1

    Makes no odds…

    It doesn’t make any difference whether the report is right or wrong, the fact that it’s out means that Apple should be seen to straighten themselves out. They need to show themselves to be responsive and responsible, especially in the present era of dubious management ethics. They need some new board members anyway.

         
  • Posted: 27 September 2002 03:50 PM #2

    Pfft! This is silly. I like the idea that Business Week will rate them as impartial journalists ... as if publishing were a cottage industry. Before I believe them, I want to know: 1) who owns them, 2) how did they rate their own company, 3) how did they rate their competitors’ companies, 4) who are the biggest sources of their advertising revenue.

    Besides, any business’ board is going to be a piker next to the US Senate.

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  • Posted: 27 September 2002 04:56 PM #3

    I’d like to see the criteria used. I believe factors used by BW include attendance at meetings by board members (Larry Ellison recently left the board voluntarily due to time pressures and attendance availability issues) and stock ownership in the company.

    I’d like to know how Business Week chose the criteria and what empirical evidence suggests a correlation between the issues and the effectiveness of a board.

         
  • Posted: 27 September 2002 08:01 PM #4

    shifting sands

    The new culpability standards that the enron mess has created has put new legal responsibilities on board members. I know some people who used to sit on several boards.Apparently board members don’t trust the ceo’s of these company’s to accurately portray the financial’s of the company’s (that they must sign off on). Since they (board members) could become ultimately liable for accounting decisions that the ceo makes they are weighing the risk (my personal assets tied up in litigation) with the rewards (a pile of money i don’t really need)and bailing out of commitments to any company’s they haven’t the time to watch like hawks.
    I predict you will see a lot of maneuvering in many company’s boardrooms as these guys protect the gains they made during the “wretched excess"of the late 90s
    i love the code they use as they head for the parachutes ” I’m leaving to be with my family and pursue other interests”

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  • Posted: 27 September 2002 08:12 PM #5

    I personally find it amusing that this story appears on MacObserver right alongside a story about how Apple is undervalued and that their sitting on $4.5 billion in cash.

    And their board is considered among the worst?????

    Get a frickin’ clue BusinessWeek. This isn’t going to help your sales. Their subscriptions for doctors and dentists offices must be slipping.

         
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    Posted: 27 September 2002 08:51 PM #6

    Found it.

    http://www.businessweek.com/magazine/content/02_40/b3802004.htm

    Founder Steve Jobs owns just two shares in the company. Recently departed director Larry Ellison had none and had missed more than 25% of meetings in the past five years. The CEO of Micro Warehouse, which accounted for nearly 2.9% of Apple’s net sales in 2001, sits on the compensation committee. Since 2000, the board has awarded Jobs 27.5 million stock options and a $90 million jet. There is an interlocking directorship—with Gap CEO Mickey Drexler and Jobs sitting on each other’s boards.

    It’s based on the number of investments board members have in the company, Salary of board members, lack of company insiders on the board, and number of unique board members (not chairs on other companies). It’s ultimately based on the likelyhood of a board to loot the company Enron-style, rather than the actual skill or competance of the board.

    Ironicly, it lists Walt Disney under the list of “Most Improved”, even though it’s “improved” from being one of the most incestuous cluster****s ever assembled to keep Michael Eisner’s worthless butt employed, and still remains as such. It might lkeep them from Going Enron, but it dosen’t prevent the company from being sucked dry and run into the ground legally through incompetance and vast greed.

    Bitter, me?  :eg:

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  • Posted: 27 September 2002 09:31 PM #7

    This is hilarious. On the one hand critics complain that the stock options Steve Jobs has received (he has options on a bit over five percent of the company) are too much. Now Apple is ranked as having one of the worst boards in part because Mr. Jobs has not excercised any of those options.

    Damned if you do, damned if you don’t. What Business Week knows (as the New York Times has stated) whenever Apple is mentioned readership rises.

         
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    Posted: 28 September 2002 12:19 AM #8

    Thanks to KitsuneStudio’s magical link that doesn’t require a BW subscription, I have a story up at TMO .  It includes my commentary on what I consider to be a nice, lovely bit of crap-journalism.

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    Favorite (but less relevant than it used to be) Quote: Microsoft’s tyranny lies not in its success, but in the way it achieved and maintains that success.

         
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    Posted: 28 September 2002 09:54 AM #9

    It wasn’t THAT magical… just go to http://www.businessweek.com and click on the cover story.  raspberry

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  • Posted: 28 September 2002 10:49 AM #10

    I really don’t knoww much about economics 101, but this BW article doesn’t make it any clearer. SJ gets $1 a year from Apple as salery IIRC, and a few bonusses. What’s wrong with that? Are the bonusses too high or too low in BW’s opinion? And that about SJ being on GAP’s board and a GAP dude at Apple’s board. I thought that’s normal. You don’t put any Joe 6-pack on a multibillion company board and since both Apple and GAP are succesful companies I don’t see any problems with being on eachothers boards. There are enough people in The Netherlands who are also on more than one board of directors. What’s the problem with that?

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  • Posted: 28 September 2002 12:04 PM #11

    [quote author=“hoytt”]I really don’t knoww much about economics 101, but this BW article doesn’t make it any clearer. SJ gets $1 a year from Apple as salery IIRC, and a few bonusses. What’s wrong with that? Are the bonusses too high or too low in BW’s opinion? And that about SJ being on GAP’s board and a GAP dude at Apple’s board. I thought that’s normal. You don’t put any Joe 6-pack on a multibillion company board and since both Apple and GAP are succesful companies I don’t see any problems with being on eachothers boards. There are enough people in The Netherlands who are also on more than one board of directors. What’s the problem with that?

    Well, really, there is nothing wrong with it in and of itself. In fact, it’s kind of what you would expect. People who are competent to do a particular job are pretty rare, if the job is worth having. Therefore, you would expect those competent people to be highly valued. Since being on the board is not a 40 hour a week job, the board members can be on the boards of different companies without it affecting their performance at each company. (Well, within reason, of course.)

    What seems to lie behind the comments are the masked whines of inferior people (and how many journalists fit in that category!) who are prone to cry “Unfair!” and who see life as a zero sum game: ie, that the only reason I have money is that I took it from someone else. This is palpable nonsense, of course, because we are a heck of a lot wealthier now than our ancestors were 1000 years ago, and that extra wealth had to come from somewhere.

    Also, consider what journalists are like. If a group of whales is called a “pod” and a group of cows a “herd”, shouldn’t the term for a group of members of the press be called “a lemming of journalists”? I heard that on the radio one day and nearly wrecked, I was laughing so hard.

    Anyway, I’ll tuck my soapbox away. Again. Sorry about that.

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  • Posted: 28 September 2002 01:17 PM #12

    [quote author=“tbone1”]

    What seems to lie behind the comments are the masked whines of inferior people (and how many journalists fit in that category!) who are prone to cry “Unfair!” and who see life as a zero sum game: ie, that the only reason I have money is that I took it from someone else. This is palpable nonsense, of course, because we are a heck of a lot wealthier now than our ancestors were 1000 years ago, and that extra wealth had to come from somewhere.

    Wow! Zero Sum! Brings back memories! The Zero Sum theory was so flawed it brought about the end of classic liberal economic thought. Gosh! What a throw back! I remember the Zero Sum theory being used in college classrooms when socialist educators ruled the economics departments at many colleges and universities until the early 80’s.

         
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    Posted: 28 September 2002 03:52 PM #13

    Actually tbone if BusinessWeek is now the “Liberal Media”, the world has finally gone nuts. wink

    The way I understand it, it has very little to do with “greedy bastard picking up two paycheques”. The concern is more over the amount of time and effort the individual can spend running the company they sit on, and the likelyhood of corruption to occur when you get a group of friends and cronies voting on the resolutions. You know, like Congress. wink

    Makes sense, but it’s not perfect. Steve actually CEO’s two companies, and Pixar survives quite well with his limited involvement. Just because a person sits on the boards of multiple companies dosen’t necessarily mean they’ll give preferential treatment to a board either. Case in point, Intuit’s William Campbell sitting in at Apple certainly didn’t give Apple any sort of preferential treatment with Quickbooks or Quicken.

    The goal apparently is a board where all members hold stock in the company, can focus their attention full time on the running of the company, are unable to profit by directing corporate funds to themselves under the guise of independant contracting, are monitored by a watchdog group, and can vote on issues without friendsip, relationship, or cronyism getting in the way.

    The points they make are valid, but ultimately arbitrary. The problem is, that a board with apparently serious flaws ike Apple can still operate effectively, whereas a perfectly “good” board can still be made up of enough idiots to run the company into the ground, or enough greedy people to sacrifice everything good about capitalism in the quest for increased stock prices.

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  • Posted: 28 September 2002 10:59 PM #14

    [quote author=“KitsuneStudios”]

    The goal apparently is a board where all members hold stock in the company, can focus their attention full time on the running of the company, are unable to profit by directing corporate funds to themselves under the guise of independant contracting, are monitored by a watchdog group, and can vote on issues without friendsip, relationship, or cronyism getting in the way.

    The points they make are valid, but ultimately arbitrary. The problem is, that a board with apparently serious flaws ike Apple can still operate effectively, whereas a perfectly “good” board can still be made up of enough idiots to run the company into the ground, or enough greedy people to sacrifice everything good about capitalism in the quest for increased stock prices.

    These are good points. But I don’t know if I’d call Apple’s board seriously flawed,at least at this point in time. When Steve Jobs returned to the company he brought back to Apple a zeal similar to that of high-tech start-up firm.

    Apple had particular needs that could be best addressed by a smaller, highly focused group of directors.

    We’re not talking about GM, Coca-Cola or Bank of America, etc. with a century-old business, complicated ties to national and international governments and big financial stakes in lots of communities.

    Apple needed a turn-around crew on its board. As Apple’s reality changes, it may be time to consider expanding the Board of Directors to a level close to its former size and adding to the Board individuals who can help Apple make the leap into the enterprise market.

    Apple current Board members have done their job. That’s more importnat than meeting BW’s arbitrary criteria for effective board measurement.

    Remember, too, that many large companies have representatives on their boards that are required by union agreements, social action pledges or government requirements to meet certail social or economics needs in the communities where they have significant operations. Many of the board members who represent these special interests are not likely to be large shareholders and in fact requiring that they own large blocks of stock may compromise the reasons why they have been appointed to the board.

    For obvious reasons there can be no “one size fits all” measure for board effectiveness. Business Week ought to no better.

    On the issue of Jerome York, one should look at his biography before passing judgement. He is a proven financial genius and I believe he was among a group of investors who purchased Micro Warehouse long after joining Apple’s baord.

         
  • Posted: 29 September 2002 09:58 PM #15

    McGraw-Hill

    In response to posters who wonder where BusinessWeek’s sympathies and obligations lie, one need only look at the holding company - McGraw-Hill, which is an “educational” publishing house.

    Take a look at the About Us link at BusinessWeek at   and you will see that BusinessWeek’s place within the structure of the company is essentially as a propaganda tool.

    You would not describe its raison d’etre as being consistent with the truer ideals of journalism, if there is such a thing of course, as BusinessWeek serves principally to reflect and support the commercial pursuits of the company which publishes it. Is there a difference between this and most newspaper publishers? Yes, there is, but it is a fine line.

    I would hasten to add its staff/contributors are journalists only in the sense that they write on a periodical basis. Their pursuit of what is in the public interest is not their priority.

    Being familiar with the structure of publishing houses, I can advise that BusinessWeek’s journalists are incapable of independent editorial direction. That they are typically correct on their reporting of business issues is likely not attributable to great journalistic acumen but because the beat ain’t that hard. There are few outstanding business journalists in the world and there’s a good reason for that. The facts pretty much take care of themselves.

    I wouldn’t take BusinessWeek seriously. Neither should you.

    It’s not too great a stretch to imagine McGraw-Hill “editors” being willing to take a shot at Apple because they know it will do them no harm. Almost certainly, it’s an editorial decision that would ingratiate the company to anyone for whom Apple is seen as competition or a nuisance.

    Oh, and Tbone, if you dislike journalists so much ... should I assume you don’t give a damn for free speech or the need to protect the public from businesses or governments that don’t care less for their wellbeing?

    It may come as a surprise to you to learn that for every thousand or million stories or whatever other arbitrary volume you care to pick, that there would have been at least one example of a story that made a difference to you, that mattered, that maybe even saved your life or your wealth or possibly even your career.

    I’d be willing to concede as a journalist that a helluva lot of the work I do is a waste of ink but every now and then I make a difference and that’s what counts.

    You wanna take this forum to spout off at someone’s profession then fine, but it only demeans you to be taking cheap shots from the safety of your armchair.

    What great service do you provide the community that gives you the right to be so judgmental?

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