Steve Jobs was unique, cut from a different cloth, on a different plane of thinking that set him apart from other CEOs and leaders. Over the past ten years Apple has gone from strength to strength because of his vision, but now that Steve Jobs is gone, can Apple keep it up? I think they can, and I think it’s because the Apple Board knows what drives long-term shareholder value. And you only need to look at the extreme remuneration package that the new CEO Tim Cook has signed up to as proof.
When you look at companies that are delivering great results globally, it’s hard to ignore that many of them are run by the guys that started them. Apple of course, Google, Facebook… all of these are run by the founders. These companies appear driven by the legacy that the founders want to leave behind, and their entire business and decision making process revolves around that, not the current years financial numbers. In short, they are hard-wired to create sustainable value for their business.
The reverse seems to hold as well, that once great companies that were run by their founders start faltering when they leave. Case in point: Microsoft. They haven’t had the best five years since Bill Gates resigned.
It makes me wonder how businesses can create that culture within their own organisations when they may not have the luxury of being run by founders.
Most large corporates have Employee Share Programs and even executive remuneration structures that incentivise longer term thinking, but it’s only ever a small portion of what hits their hip pocket. What really makes the big bucks is whether they are able to hit the current financial year targets. Too many businesses make decisions to meet the current year’s target, not to create sustainable value.
Steve Jobs was only ever paid $1 for his services as CEO of Apple, with the rest of his remuneration tied up in shares, a sure fire way to make sure he was focussed on long term shareholder value. For Tim Cook a similar strategy has been employed, with the Board issuing him 1 million Apple stocks (worth an incredible $350m at current prices), but the catch is that half the stocks vest in five years time with the other half in ten years time. That’s a long time, and it means that Tim will be less interested in how maximise this years result, and more interested in how to create long term value that maximises the stock price in five and ten years time.
I think it’s a great strategy and philosophy on how to instil a little more long term thinking in corporates and one that I’d love to see more of in Australian business.
I’m sure Steve Jobs had a hand in setting up this remuneration structure given he was Chairman of the Board at the time it was signed with Tim Cook. I’m guessing it was his little way of ensuring that long term vision stays entrenched at Apple. Nice touch Steve.
