C. HUYGENS - Thursday, February 28, 2013
Apple Inc. is a firm that has sought to communicate a singular message through every channel. Whether the message was sent by the marketing department, investor relations, or the product team, the content was the same: Apple is an innovative company producing the coolest products on the plan.
It so happens that even with such clarity, stakeholders can get confused when it comes down to the details. Consider this post
, a few weeks ago, labeled "contrarian."
(1) Tim Cook is an innovator on the supply-chain side despite his stuffy
reputation, (2) Apple Inc. (NASDAQ:AAPL) has the potential to "become a
massive mobile-payment provider," (3) it still has the "best selection
of apps of any mobile operating system," and most notably, (4) it
predicts that "Apple’s sales in China are only beginning their upward
Now fast forward to this week's shareholder meeting where investors are battling over Apple's use of cash and are expressing their unhappiness with executive compensation plans. The company is under pressure to return more of its cash hoard to investors after David Einhorn’s Greenlight Capital Inc. persuaded a judge to block a vote on whether to limit creation of preferred shares. According to Bloomberg
, "Einhorn has used the lawsuit to drum up support among fellow investors to get Apple to return some of its $137.1 billion in cash and investments back to shareholders. The push comes as Apple’s stock has declined 36 percent from a record in September on concern that growth is slowing." The Financial Times
reported that "at least a third of Apple’s shareholders have declined to back the company’s executive pay at its annual meeting, after chief executive Tim Cook was given a 51 per cent increase in his basic salary last year and other members of the management team were given big equity awards."
Wait. There's a contrarian view. Calpers, the largest US pension fund, disagrees with Einhorn. According the the Financial Times
, Anne Simpson, head of corporate governance for Calpers, said that shareholder support for Apple’s proposed changes reflected a fundamental difference in approach between activists and long term shareholders. “Do you throw a brick through the window, or do you walk smartly up to the front door and ring the doorbell?” One of Einhorn's own investors took issue, too. In a letter to the founder of Greenlight Capital, the Nathan Cummings Foundation said: “By threatening to disenfranchise Apple shareholders, Greenlight Capital has acted in a manner that is not consistent with our understanding of Greenlight Capital’s own orientation and investment philosophy.”
There is ample anecdotal evidence that Apple's stakeholders are confused. What say the measures of reputation, which are nothing more than an indication of the economic consequences of stakeholder expectations. As provided by Steel City Re
, the measures show, well, confusion. Call it lack of consensus. RVM is a non-financial measure of reputational value, and its volatility is an indicator of alignment. Apple's current RVM volatility is up from the 33rd percentile among its peer group, its historical value, to the 48th percentile with recent spikes as high as 8% after running lows of sub 2%. Stakeholders are surprised. They're not used to dealing with an unclear picture from Apple, and the cost of that confusion is the equity investors are fleeing. In local parlance, Apple's reputational value premium
, while still at the 86th percentile of its peer group, is no longer at the 100th percentile. The company is losing reputational value, which, as described in great detail in Reputation, Stock Price, and You,
rarely goes unnoticed.