Dow Jones soars above 23,000. Is it too stretched? >>> READ MORE

Why Tim Cook Is Trying to Change Apple’s Board

Tim Cook may be creating short-term disruption, but it will help Apple stock in the long run


If you’re an Apple (AAPL) shareholder, you might be growing weary of seeing nothing from the company besides updated versions of existing products. But we might be on the verge of seeing some serious changes.

Source: Wikipedia

In a recent commentary penned for The Wall Street Journal, reporter Daisuke Wakabayashi notes that after nearly three years on the job, Apple CEO Tim Cook is finally ready to shake things up in a major way. One of the first rumored overhauls Cook is seeking — allegedly — is the placement of new board members, which would mean the replacement of at least some of the old ones. And truth be told, it might just be what the doctor ordered for Apple stock.

Why is He on the Apple Board of Directors?

Let’s call a spade a spade. Most of the time, nobody cares who’s on a company’s board of directors. The majority of board members were voted into that position simply as a favor, or to open new doors of opportunity, or both. The days of a board actually holding a company’s management team accountable are largely a relic.

Yet, every now and then, the relationship between a board and a management team can become so fruitless, it’s clear something has to be disrupted just to avoid stagnation. Kudos to Tim Cook for recognizing that before it takes a toll on the value of Apple stock.

The problem isn’t the caliber of people who call themselves Apple directors. Indeed, Apple’s Board of Directors reads like a list of the business world’s most influential movers and shakers. That, however, may be the core of the problem — most of Apple’s directors have a great deal of experience and a great deal of interest in areas other than consumer electronics. Take a look at the current board, and their other obligations:

  • Arthur Levinson — Apple’s Chairman of the Board, Chairman and former CEO of Genentech
  • Bill Campbell — Chairman and former CEO of Intuit Corp.
  • Tim Cook — Current CEO of Apple
  • Millard Drexler — Chairman and CEO of J. Crew
  • Albert Gore Jr. — Former Vice President of the United States
  • Robert Iger — Chairman and CEO of The Walt Disney Company
  • Andrea Jung — President and CEO of Grameen America, Inc.
  • Ronald Sugar — Former Chairman and CEO of Northrop Grumman

This isn’t to say that every single board member is required to be an ex-CEO of a consumer electronics firm, nor is to say no director should be actively involved in the leadership of another corporation. On the other hand, how much contribution can the former CEO of a defense contractor and the current CEO of a clothing retailer be making?

One could argue these folks bring broad business management experience to the table, and may offer expertise in areas like inventory management or sales. Yet, Apple has grown itself into one of the biggest and most complex companies in the world, and it’s being led by Tim Cook, who is often hailed as an operational genius. There’s probably not a lot of insight left for Apple to glean from its Board of Directors.

Too Many Tim Cooks Spoil the Broth

While the experience and insight Apple’s Board of Directors brings to the table may be in question, perhaps even more alarming is the demographic breakdown Tim Cook sees when he sits down to have a pow-wow with the board. Six of the seven non-Apple-employee board members are 63 or older, while Tim Cook isn’t exactly young at 53. Six of the seven outside directors are also men. It’s a cross section of consumers that looks nothing like Apple’s target market.

For perspective, half of iPhone owners are women, and the age groups buying the most iPhones are the 18-24 and the 25-34 brackets. Tablet ownership, regardless of brand, is most concentrated in the 35-44 age bracket, and again, it’s an even mix of men and women. At some point in time, the group of mostly older gentlemen guiding the ship — with Tim Cook at the helm — is going to miss something critical about who is buying its product.

The bottom line is, Apple stock owners should embrace the possibility that Tim Cook is looking to shake things up, no matter how he intends to do it. An overhaul of the Board of Directors isn’t the only task that needs to be completed in order to reinvent the company, but it’s a great first step.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

©2017 InvestorPlace Media, LLC