Tim Cook: Controversy Over Preferred Stock Is “Silly Sideshow”

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Speaking at today’s Goldman Sachs Tech Conference, Apple CEO Tim Cook was asked a series of questions about the recent controversies involving Greenlight Capital’s David Einhorn, who believes Apple wants to eliminate preferred stock and is suing the company over it.

Cook’s answers were candid, saying that the issue was widely misunderstood, and that he viewed the lawsuit as a “silly sideshow” that wasted the money of investors.

The first question Cook was asked was whether or not Apple had a “depression-era mentality,” to which he replied:

Apple doesn’t have a depression era mentality. Apple makes bold and ambitious bets on products, and we’re conservative financially, but if you look at what we done in terms of investment, last year, we invested $10 billion, and do similar this year. My definition of a depression-era mentality is not a company that invests tens of billions a year. And when you combine that with the fact that we announced last year we’re returning $140 billion, I don’t know how a company with a depression era mindset would do those things.

Now… we do have some cash. *laughs* But it’s a privilege to be in this position, where we can seriously consider returning additional cash to shareholders. The board is in very active discussions, and we will be deliberate and thoughtful. That’s what our shareholders want.

Following up, Cook was then asked about the recent controversies over preferred stock and ideas put forward by David Einhorn in regards to returning more money to investors.

Cook said that he thought such a proposal was “creative” and that “Apple welcomes all ideas from all shareholders.”

However, Cook was more blunt when speaking out about the lawsuit Einhorn was pursuing against the company over its proposal that would eliminate preferred stock, calling it a misunderstood issue.

I don’t think this is well understood. What this proposal is about is about the rights of shareholders. I want to be very clear on this: it’s not about whether Apple returns additional cash, or how much, to shareholders. It’s not about the mechanism to return it. It’s about the right of shareholders.

So some time ago, in early 2012, we were looking at what things we could do to improve our governance further, and as part of that review, one of the items that came out of that was that we thought we should eliminate a blank check preferred from Apple’s charter. What that means is that Apple can’t release preferred shares, it just means that if Apple decided to do it, we’d need common shareholders to give their approval.

So I find it bizarre that we are being sued for doing something that is good for shareholders. But this is the position we’re in.

As for the lawsuit itself, Cook characterized it as a waste of money and a “silly sideshow.”

I think it’s silly. My preference would be that everyone on both sides of the issues would take the money they are spending on this and donate it to a worthy cause. We’re not campaigning though. You won’t see a “Yes on 2’ sign on my lawn. It’s a waste of shareholder money and a distraction, and not a seminal issue for Apple.

That said, I support it, Prop 2. I personally will vote for it. I believe it is the right thing for shareholders to have the right on this particular topic. I encourage others to vote for it. But it’s not something we’re going to spend a lot of time and resources on.

About the author

John BrownleeJohn Brownlee is a Contributing Editor. He has also written for Wired, Playboy, Boing Boing, Popular Mechanics, VentureBeat, and Gizmodo. He lives in Boston with his wife and two parakeets. You can follow him here on Twitter.

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