October 6, 2011
What may have been the last real CEO passed away yesterday: Steve Jobs, founder and CEO of Apple. A complete volume could be written about this man, and I’m sure several will attempt to do so. Jobs certainly deserves that recognition; he was a visionary who turned his overly-brilliant ideas into reality. He was deservingly loved and respected by millions. But here, the Old Man wants to take a different kind of look at the future of Apple.
Chief Executive Officer (CEO):
Top executive responsible for a firm’s overall operations and performance. He or she is the leader of the firm, serves as the main link between the board of directors and the firm’s various parts or levels, and is held solely responsible for the firm’s success or failure.
Apple will survive without Steve Jobs — not much question about that. However, if one were to go to sleep today and awaken 10 years from now, they’d be hard pressed to recognize the Apple they once knew.
About Peter Drucker, the man who is given credit for inventing management:
Drucker was sickened by the excessive riches awarded to mediocre executives even as they slashed the ranks of ordinary workers. And as he entered his 10th decade, there were some in corporations and academia who said his time had passed. Others said he grew sloppy with the facts. Meanwhile, new generations of management gurus and pundits, many of whom grew rich off books and speaking tours, superseded him. The doubt and disillusionment with business that Drucker expressed in his later years caused him to turn away from the corporation……
I opened by suggesting that Jobs may have been the last real CEO of a major corporation. I didn’t idly choose the word “real”. Here’s why.
As I have said a number of times in the past, up until the mid to late 1980’s most CEO’s was head of a company for 20 years or more. The only responsibility was to insure the company was not only still around 30, 40, 50 years down the road, but that the company would be in much better shape than it was when he took over the helm. If the CEO was successful in that endeavor, then all other responsibilities he was charged with were fulfilled.
By contrast, today’s CEO usually last 3 to 5 years, and has one single objective: To commandeer as much of the company’s wealth as possible, usually in the hundreds of millions of dollars, and get the hell out of town before anyone realizes (or admits) that his actions has put the company’s existence in jeopardy. As one might expect, these CEO’s typically have absolutely no skin in the game except maybe a few years of employment, and in some cases, no previous employment with the company whatsoever.
Steve Jobs, who held the continued growth, success and future of Apple far above personal wealth, is no longer there. Yes, Tom Cook, who replaced Jobs as CEO in August, may very well strive for a while to advance Apple the way Jobs might have. But Cook has a personal incentive to last at least 10 years as CEO.
Included in Cook’s contract was 1 million shares of Apple stock. At the then-current price of $383.58, the stock was worth more than $383 million. But Cook can’t collect on all of the stock’s value for 10 years. However, he does have an option to collect on half of it in 5 years, which, if the stock holds its current value, will be just shy of $192 million. But what would those 500,000 shares be worth if he followed in the footsteps of the typical modern-day CEO?
Most of today’s mover & shaker-investor types either idolize the Yuppie generation or were a part of that generation. Which means they want total “success” (by their definition) today. And to achieve that goal, they have no problem at all taking what’s not morally — or legally, if they believe they can get away with it — theirs. (Their unwritten creed was / is that “you deserve nothing I can take from you) Therefore, should they see signs that Apple’s stock is about to increase substantially, regardless of the reason, they will jump into Apple; which in itself will escalate the stock value.
Over the past 20 years, CEO’s have proven that a company’s stock value can be increased in any number of ways without actually making the company more valuable or stable. So if Cook could increase the value of Apple’s stock without actually advancing the company’s future successes the way Steve Jobs would, he may be able to realize today’s full value of the his one million shares — or something close enough to be acceptable — in just five years; then move out to enjoy his spoils.
Once Cook vacates the CEO’s chair, another will move in. Then his “job” will be to “get his (unearned) share” as quickly as possible and move on, allowing those who have helped him get the top job. The end result will be that Apple will become a looters paradise much like most other major companies have over the past two decades.
Never underestimate the difficulty of changing false beliefs [with] facts.
Economist Henry Rosovsky