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Apple's Being Run As A Public Company, Google And Facebook Still As Private Ones

This article is more than 9 years old.

The events of the last few weeks have given us an interesting insight into how three of the largest tech companies are being run. This isn't complete of course, it's only a view, but it would be fair to say that Apple is being run as a public company and Google and Facebook are still being run rather more like private ones, albeit ones that have external shareholders.

The standard economic description is that a company should be run for the benefit of the shareholders. Yes, there's plenty who would rather this wasn't so, the corporate responsibility movement, the various people who advocate stakeholder interests and so on. But it is still that basic assumption, that since the shareholders own the company then it should be run in their long term interests. That's rather what property means after all. And as we can see from Apple's recent good financial results and what they're doing with all that cash Apple is indeed being run in shareholders' interests. Good profits lead to an increased dividend and further stock buybacks. This maximises the return of those profits to said shareholders which is, in this theory at least, rather the point of the whole company existing in the first place. There is a downside to this, which is that these actions will have Carl Icahn doing the victory dance and what makes that gentleman do that dance is always to be viewed somewhat askance. But then nothing will ever be perfect in this life.

Further, note what Apple is not doing: it's not splashing out that pile of cash to purchase Apple a position in a new line of business. Sure, there are purchases, there are investments (for example, in that sapphire factory) but they are add ons, increases in productivity, for the activities that Apple already undertakes.

Now look at the very different behaviours over at Facebook and Google. Both are buying into other businesses with gusto and abandon. Both are expanding well away from their core competences and neither of them are returning cash to their shareholders in any form. So, we might want to see what it is that leads to this changed behaviour. And that, I think, comes from the difference between who the shareholders are. All three companies are being run in the interests of their shareholders, yes, but there's a very different profile to the shareholder structure.

Mark Zuckerberg has a majority of the voting stock of Facebook, Larry Page and Sergei Brin have a majority of the same over at Google. None of the three has an economic majority in their respective firms but they do have a control majority. Thus, the companies are being run rather more in the interests of those controlling shareholders rather than the simply financial ones. The difference being that those three individuals aren't, particularly, worried about immediate or even medium term financial return. Yes, they do think about it, but it's a means to an end, the ability for those companies to prosper and then go on to do interesting things. Or, if you prefer, for those founders to use the companies to go on to do interesting things.

There's no such concentration of shareholdings at Apple. So, the company is being run more in the interests of the financial shareholders rather than any founders. Or, as I said at the top, Apple is being run more like a public company and Facebook and Google more like private ones. And don't forget, I've already said that this isn't the whole truth, but it is a part of it it.