Beset by critics and bedeviled by a declining stock price, Tim Cook, the company’s beleaguered chief executive, announced a big stock buyback and a substantial dividend increase. The market did not, however, respond by pushing up Apple’s stock price. But these actions do raise the question why Apple, which has too much cash on its books and is trying desperately to return cash to its shareholders, a company unlikely ever again to need to raise money in the public markets, should worry so much about its share price anyway?
And it’s not just Apple. CEOs are obsessed with their companies’ stock price. So companies faced with falling shares frequently announce share buybacks, even though research shows (pdf) that many such buybacks are not completely consummated. Other data suggest (pdf) that companies’ market timing is often quite off, with the businesses buying their shares at high prices and issuing them at low prices, a buy high, sell low strategy that benefits no one. Meanwhile, CEOs spend lots of time doing analyst presentations, conference calls, and the increasingly ubiquitous industry investor conferences where they sell—not their products or services to real customers, but their investment attractiveness to kibbutzers.
