Apple announced the other day that it will pay a dividend to its shareholders. It could have been a company communication like millions of others, but it wasn’t. There is only one Apple, a hugely successful company that hasn’t paid out a single nickel for 16 years. It is understood that the cash pile has risen to about 100 billion dollar (the GDP of Ireland stood at 180 billion in 2011). 45 billion dollar will be made available for payment over 3 years. I have 2 questions regarding this announcement, the first is economical, the second rather ethical.
- I am wondering why those 100 billion weren’t invested in further research and development projects, something I would expect of a company regarded as one of the, if not THE most innovative company in the world? Or what about merger and acquisition activities (M&A)? Are the opportunity costs of holding cash over investment so low that the expected return on any additional dollar spent on the future success of the business are not worth taking the risk? The fact that interest rates are on an all-time low makes this point all the more striking. Does Apple reveal doubts about the prospect of a robust and sustained recovery of the economy by this announcement?
- The ethical question of 100 billion in cash is: How was it earned in the first place? Like many other corporations Apple has outsourced the manufacturing part of the business to suppliers, mainly located in developing countries, to maximise profit margins. What about working conditions there (Apple has been continually accused of maltreatment of workers on those plants)? And finally, has the taxman been given a fair share of the profits? Put the question the other way: Do current tax regimes ensure that corporations as big and as successful as Apple pay according to the resources and the financial muscles they have?
We should take note when big companies come out and make announcements. A significant message could be hidden behind fancy gadgets or big numbers.