Essay Apple Corporate Governance

917 Words Oct 16th, 2015 4 Pages
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SGMA 591 Case 1
APPLE – STOCK GOVERNANCE AND STOCK BUYBACK
SYED AHMAD
Dr. Won-Yong Oh
29 / 09 / 15
SYED AHMAD
Dr. Won-Yong Oh
29 / 09 / 15

1) When analyzing Apple’s Board of Directors, one can see that while it is diversified and overall strong in many regards, there are also a number of underlying issues that must be addressed. To do so, one must consider each of the functions that define a “good” Board: * Oversee managers to ensure maximization of shareholder wealth * Direct the organization’s affairs * Punish and reward managers * Protect shareholder interests * Protect owners from managerial interests * Independence of the Board
To this end, Apple has done well
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This structure may be concerning to shareholders as it does not incentivize the executives to ensure the sustainable growth of the company. Specifically speaking to each missing component of compensation – the lack of performance based bonus means executives are not as invested in year-to-year performance as some of their counterparts may be. Secondly, the lack of annual stock awards is concerning because it limited the interest executives may have in the long-term growth and performance of Apple.
With that being said, several executives have received substantial stock options in the past – upwards of almost 400 times their base salary in value. Furthermore, relative to Apple’s size, its executives’ base salaries are all quite low – in the $1mm range – suggesting the executives are motivated by passion, rather than absolute monetary gain. Regardless, a number of improvements can be made to the current compensation structure – for example, the introduction of short-term, performance based bonuses would drive executives to strive for strong performance year-over-year. Secondly, pursuing a more equitably distributed stock option would be conducive to executives consistently making decisions in the interest of long-term value creation and shareholder satisfaction. By making these adjustments to the current compensation structure, Apple’s executives will be able to align their interests more

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