Apple (AAPL) seems a little embarrassed. In a 16-page statement prepared for Chief Executive Officer Tim Cook’s testimony to Congress today, the company explains that it employs tens of thousands of Americans, makes “revolutionary products” that improve our lives, and pays billions in tax dollars every year. It lists these things first. Then it explains it has provided returns to its shareholders, among them public pension funds, for whom the company “safeguards the capital entrusted to it.”
Apple is saying two things. First, it has done good things for America. Simply by existing, it creates jobs, makes our lives better, and even kicks some money back to the Treasury. This is true. Second, Apple has not only provided asset growth and dividends to its shareholders, it has a moral obligation to do so. This is also true. But two true things don’t add up to an argument.
Anytime a company talks about creating jobs, you can be certain it wants something from the government in return. Apple is a public company. Its only possible purpose is to create shareholder value. Jobs are an accidental byproduct. There’s nothing wrong with this; we don’t actually want Cook and Congress horse-trading on jobs. If you use the power of government to compel a corporation to create jobs it doesn’t need, you create economic inefficiencies. And, you know, socialism.
So Apple creates shareholder value magnificently. Great. But tax evasion is a completely different question, a legal one. Either Apple is following the law, or it isn’t. End of story. It’s a little suspicious to hear all this wishy-washiness about creating jobs and improving our lives. Cook sounds like he suspects that the way his company pays its taxes is not just a legal question, but a moral one.
Apple is embarrassed. The need to create shareholder value can create good things for the public, like jobs and products. But it can just as easily create bad things. It can close factories and hide pollution. It can drive corporations to quietly push for regulations that reduce competition and raise prices. Like gravity, the drive to create shareholder value has no moral content. Water runs downhill. Good if you’re turning on a faucet. Bad if you live near a riverbed, swollen in the spring.
Cook’s statement mentions, several times, that public pension funds are among Apple’s shareholders. If Apple has an obligation to all of its shareholders, in theory no single shareholder should matter more than any of the others. But pension funds in total hold slightly less than 4 percent of Apple’s equity, and investment advisers hold a little more than 87 percent. Apple’s statement mentions by name the State Teachers Retirement System of Ohio, which holds 0.15 percent of equity, and not the Vanguard Group, which alone holds 4.61 percent, more than all pension funds combined.
Cook wants to have it both ways. He wants to create shareholder value. He also wants to be good for America. The statement mentions in passing that Apple would prefer that the U.S. reform its tax system entirely, eliminating all exemptions and lowering rates. But the company also doesn’t want there to be anything wrong with its creative use of the system as it stands now. I’m not offended that Cook is maximizing shareholder value. I’m offended that I have to listen to him pretend his decisions are all morally defensible, too. He wants to be a badass capitalist and smell like a rose. You can’t have both.
We know that capitalism and democracy flourish together, but there’s also a tension between them. Executives have the luxury of convincing themselves that what they want is also the best choice for America. This is why they’d prefer to be known as “job creators,” for example. But democracies don’t have that luxury. As citizens, we hold jobs, but we also see pollution. We count on pension funds and buy delightful products like the iPhone. We also have to make hard choices about what we want from government, and how to pay for it. An executive can make a decision that both increases shareholder value and follows the letter of the law. But to a democracy—the audience for Apple’s letter—it might smell bad.
What Apple is doing by holding profits abroad, even if perfectly legal, smells bad because it robs our democracy of the ability to make decisions. Cook argues that he’s simply playing by the rules of a broken system. And the system is definitely broken. But he’s also making a moral choice. By figuring out ways to creatively use our democratic decisions to keep revenue out of the Treasury, Apple is undermining them. It can argue that by doing so it creates even more jobs, but it is arrogating that decision to itself. Apple is saying it knows better than democracy. Again, Cook is just doing his job. But it’s painful to hear him pretend that his job is to make our lives better, create economic growth, and help a schoolteacher in Canton retire. As if we should be thankful for those mercies and forgive him any other moral failures he may have made.
During the election last year, Jack and Suzy Welch argued that corporations are people, who “want to make a living and want to make a difference,” who “do indeed love and cry and dance.” They were right. States grant corporations a legal charter to shield their owners—more people—from the ravages of debt, should the business fail. This, too, is a good thing. But limited liability for debt does not create limited liability your soul. I don’t know whether Cook dances, but he’s a person. And he has not exhausted his moral obligation to the world simply by creating shareholder value. Tim Cook knows this, or his statement today would be a lot shorter.