The role of the Apple Board and the encryption issue

It's interesting that the Apple v FBI debate has been mostly reported as an issue centered firmly around Tim Cook. Of course, as the CEO, it is his job to lead on this both internally and externally. But, as the issue has moved from Apple v FBI to Apple v the US Government, we should be clear that the decisions on this will be being made by the Apple Board not by Tim Cook.

As Obama weighs into this, opposing Apple's stance, things couldn't get any more serious for the company. When one of the largest companies in the world chooses to take a position that puts itself at odds with the US Government and directly now, the US President, make no mistake - the tactical calibrations of just how far to push this becomes a matter not just for the CEO but for the Board of Directors.

This is now bigger for Apple than any single piece of M&A or product development could be. It's strategic ramifications could be huge, even existential. There is long established wisdom in the Board room that being on the wrong side of any government is a place you don't want to be. Multiply that by ten for your home government and by ten again for the US Government. It's conceivable that you might very occasionally allow this position, if you have the overwhelming weight of public opinion on your side. It's very clear that Apple doesn't have and it's looking increasing likely that this could be very bad for shareholder value.

No company should ever fall into the hubristic position of thinking that it is above the democracy that it works within - that it has the right to ride roughshod over the will of the Government. Those within the Tech community understand that this isn't the case here but to everyone else - it looks like it is.

Apple's Board has an overarching responsibility to maximize and protect shareholder value and has to protect this in the legal framework it finds itself within. If it prioritized doing the 'right thing by a moral compass or the long term good of Mankind' ahead of this responsibility then Board members will expect to get sued.

Independent Boards and corporate governance are designed to protect shareholders from an individual manager or groups of management harming shareholder value through pursuing passions or crusades that aren't in the long term interest of the shareholders. Whatever the absolute, moral wrongs and rights of this issue, being simultaneously on the wrong side of Government and public opinion almost always falls into this category.

The FBI chose very cleverly the right case context to drive this battle; a terrorist one that will always take public opinion with it. Apple's PR offensive that was designed to win this opinion back hasn't worked. This is why Obama could and did speak out (he wouldn't have wanted to be on the wrong side of public opinion at this stage in the electoral cycle either.) This is a rare example of Apple being out maneuvered.

The not so coded message contained with Obama's intervention was 'compromise or expect a hard hitting legislative response.' Inside Apple's Board room, it's probable that voices will be moving more firmly toward directing that the management team find a suitable compromise.