Since I started law school last year, every so often I have a moment where I realize that the subjects we talk about and the concepts we learn really do have an effect on how I see the world. Looking at this question, I had one of those moments. If you had told me just this past summer that Tim Cook said “I don’t consider the bloody ROI” when asked about environmental impact and accessibility for the blind, I would have thought, “Way to go, Tim!”
Now, though, having been introduced to the basic concepts of company law and envisioning myself as Apple’s corporate counsel, my gut reaction to that statement was to think, “Tim, you damn fool! Are you trying to get us sued?”
It reminded me of Professor Festinger’s story about being at an expensive restaurant where the conversation turned towards the topic of abolishing welfare, and how immersing yourself in a certain environment can skew your perception of reality. I’ve been in a course on company law for not even three months and already my mentality is drifting to a notion of “profit = good; charity = bad” when it comes to discussing corporate obligations.
While I applaud Cook’s position, if I were Apple’s corporate counsel I would caution him against making such public statements about his personal bottom line not aligning perfectly with the company’s ROI. I would suggest he try to get the company to pursue those laudable goals through quieter means, or perhaps he could find some way to assert that the company’s investments are somehow good for the long-term profit margin.
Either way, I would wager that Apple’s lawyers lost some sleep over those remarks.
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A simple, if less than entirely principled, argument that meets these critics on their own terms could be to say that engaging in socially and environmentally responsible practices increases their customer base (directly, in the case of products accessible to the visually impaired, and indirectly through the marketing value of social capital) which could, on net, increase overall profits. I wonder how much deference would be given to a decision like this, and the role of projections – it’s pretty basic economics to say that sometimes profits can be maximized by decreasing the price to sell more units. Higher costs, where they lead to an increase in sales, should be subject to the same logic. Obviously this depends on the particular numbers, but that’s where the projections and deference to CEO/director/management decisions comes in.
It makes me think about the larger shareholder rights movement in general and the director’s duty to the best interests of the company, which can be and often are much longer term than the interests of shareholders. It bothers me greatly that the greater public good is so taboo as a rationale for modern corporate decision-making, but within that framework, there are possibly arguments to advance such causes. But again, I wonder about the level of deference available. I suspect it’s higher with a “rockstar CEO”, who has enough power and prestige that he can probably get away with saying “if you don’t like my governing style, sell your stock” – which as we know is the most common response of shareholders to dissatisfaction with corporate governance anyway, since they have relatively little power as things stand now.
Great post piersfib. I totally agree. Had this been three months ago, I would have not thought twice about anything other than “Yay good for you Tim” (I still applaud him for being so upfront), however, I think having the knowledge I have now (and had I been the counsel for Apple), I would have suggested him against making such public announcements and/or like you suggested, state his opinions in a way that would have portrayed long term economic benefits.
I agree with you Alisa- I think there’s something to be said for the social capital of appearing to care about the environment and people with disabilities. Not to say that Apple doesn’t actually care about these things, but the cynic inside me says that they probably care about their public image a whole lot more. Those kind of statements are marketing gold, and speak directly to the interests of their customer base. And Apple is more than a little aware of the effect that that has on their bottom line.
Times have changed since Dodge v Ford- it’s now recognized that having a social conscience can bolster profits. And so, I’d say even the most curmudgeonly, climate-change denying shareholder wouldn’t make a squeak about Tim’s statement.
I agree with you Anna – that social capital angle is gold, and there’s no way a person in Tim Cook’s position would just ‘fly off the handle’ in this way, in this context. My assumption is that the action was at least partially rehearsed. I wonder if there’s any chance that this was arranged between the complaining shareholders, some high up PR people, and maybe Tim Cook himself? That’s pretty conspiracy theory-esque, but in thinking about net gains (as Alisa was alluding to) it wouldn’t be a bad strategy. And I echo what Anna says bout the Dodge v Ford comparison. Doing the right thing, for whatever, reason, is profitable now. The Canadian Coalition for Good Governance, which was brought up during last class, is in a sense proof of this. It acts as an organizing base around which companies can develop collective accountability of socially oriented investments/business decisions. Maybe Tim Cook’s comments would have made Apple feel right at home in the CCGG.
I agree with the points raised above – that appearing environmentally friendly is good for the bottom line these days. However, I think that if Tim Cook was sued for pursuing seemingly unprofitable environmental initiatives, he might also have a good defence under the business judgement rule that Apple is setting itself up well to profit relative to less sustainable companies when the inevitable tide of environmental regulations and carbon taxes rolls in that presumably will be enacted in response to the global call for action on climate change. I think there is a good argument that any business that wants to stay profitable into the near future needs to start engaging in environmental initiatives, even if they seem unprofitable at the time.
Great post/comments.
I agree on the comments made above regarding Tim Cook’s view of corporate ethics. first and foremost, I think Cook would be covered by the business judgment rule. Even though it may not provide an immediate ROI, it may be argued that the investment in renewable energy is a forward-looking move which will pay off in the future, as more renewable energy projects are pursued. In relation, how successful would an oppression remedy be against a CEO of such high regard? I find it hard to imagine a court ruling against a progressive-thinking CEO such as Elon Musk (might explain why stakeholders are more tempered in their expectations from those CEOS, see: http://time.com/4438444/tesla-q2-2016-earnings-results-elon-musk/)
There is no doubt a concern for Cook’s lawyers, that when he speaks out on such an issue, it erodes the separate moral position of the company from the individual.