Apple Corporate Governance

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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…show more content…
In order to resolve these potential issues, it is recommended Apple implement clear processes that allow it to incentivize executives to make decisions in the best interest of shareholders. This may include specific performance metrics and decision criteria, among other things. Furthermore, the Board should eliminate any potential conflicts of interest by mandating the Audit and Compensation committees remain fully independent. 2) Apple’s current ownership structure is relatively fragmented, with the top 10 shareholders only owning roughly 20% of the company. The largest blockholder, Vanguard, with 5.4%, is followed by several other institutional shareholders. These large institutional investors – which include Carl Icahn’s activist fund – have the ability to leverage their ownership and expertise to influence management. Moreover, general public shareholders will be more inclined to listen to the suggestions of institutional shareholders given the institutions’ experience with the capital markets. At the same time, the relatively low percentage of insider ownership is promising. Executives’ lack of significant ownership of the company (less than 1%), compounded by oversight from the Board, means the executives will be forced to act in the interest of all other shareholders. There are no further issues that can be identified with respect to the current ownership structure, and Apple should look to maintain its current ownership structure.
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