OpinionConflict of interest: shareholders versus staff
Conflicts arise when the interests of investors clash with those of the people running - and trying to innovate - at listed firms like Apple
Recent events at Apple have provided a classic illustration of the clash between the interests of shareholders and the people running listed companies.
Often these issues come to a head when a public company gets into trouble, but at Apple, the clash stems from its success: the firm has amassed a mind-blowing cash pile of US$137 billion, prompting a row over what do with the money.
Before giving further consideration to events at Apple, let's step back and consider some basic issues.
In theory, shareholders give money to firms in return for partial ownership. Take the theory a bit further and you will find ideologues going on about things like "shareholder democracy" and shareholding as a means of making companies permanently accountable to all investors.
This is all fine and dandy but the facts are that once a company's shares have been floated, and unless they make a new share issue, shareholders are not providing new capital, merely trading equity in companies that have already raised the cash. This exercises a powerful influence on the way shareholders think, because their interests centre on the performance of their shares, which may well not be the same thing as the trading performance of the company. Thus, for example, the shares of a company hitting business difficulties may well rise if a takeover is in prospect.
However, some longer-term shareholders might have an interest in obtaining a better yield from their investment and therefore focus on dividend payments.