What the Apple dividend really pays out

The world's most valuable company, Apple, finally shares the wealth with investors. And Goldman Sachs tries to recover from the Greg Smith oped. The world of high finance is finally reckoning with its social purpose.

The Monitor's View

The world’s most valuable company, Apple Inc., hasn't paid a dividend to its investors since 1995 – that is, until Monday. [Editor's note: An earlier version of this story misstated Apple's record of paying dividends.]

Sitting on nearly $100 billion in cash – a sum that will only rise with the new iPad – Apple finally decided to share the wealth by paying $2.65 a share.

What makes a capitalist enterprise, especially ones with kitties the size of whole countries like Apple’s, start to act in a more equitable way, and perhaps even help reduce income inequality?

The question has been coming up ever since the Great Recession. It is reflected in the presidential contest, new regulations over Wall Street, and the “Occupy” movement.

Last week, it came up again in a scathing opinion piece by former Goldman Sachs salesman Greg Smith. He wrote in The New York Times that the culture of his former employer had become “toxic and destructive,” with so little regard for clients that they were mocked as “muppets.”

The world of high finance is held in such low regard these days that it is easy to forget that it also provides a social good. Or that most of its workers are decent people who struggle to balance the making of profits with the making of a contribution to society.

To fix today’s financial capitalism, writes Yale economist Robert Shiller in a new book, we all need “a more nuanced view of human nature as it is expressed in a financial environment.”

In an economic system that is essentially good overall, he states in “Finance and the Good Society,” we must accept that “there will be some less-than-high-minded behavior.”

Improving the financial industry is far better than simply bashing it or restraining it in unhealthy ways, he says. For sure, government must reduce its excesses and smooth its volatility by, for example, carefully regulating such activities as high-frequency computer trading, outsized pay inflation, or dangerous risk taking.

But the greater goal is to help financial capitalism create more innovations – think of derivatives or credit default swaps – while making sure new schemes are humane and transparent to end users. In fact, he contends that “advances in our economic institutions may ultimately be more important than those in our hardware and software.”

Mr. Shiller is no slouch in finance. He foresaw the bursting of the 2000 high-tech bubble and the 2005 housing bubble. And he makes concrete proposals for his defense of high finance as the “architecture” for society being able to grow and progress.

One of his solutions is “continuous-workout mortgages,” in which a homeowner’s monthly payments would rise or fall with housing prices or the economy. Another idea is to index government pensions to economic growth to spare taxpayers from paying too much.

He says the way to reduce excessive risk taking in high finance is to give far more reliable and easy-to-understand information to those who participate in it, such as those who save for retirement.

But the best solution is to increase the visibility of moral purpose that those in the financial industry see for themselves.

“Day to day,” writes Shiller, “it is hard to see the moral purpose inherent in helping one’s clients, and so it is easy to conclude that such moral purpose doesn’t even exist among people in finance. However, most people naturally project such purpose onto their daily routine. Most of us instinctively want to be helpful and good, within limits, to those around us.”

Americans can help financial capitalism have an honest reckoning with its moral purpose by accepting the principle that some income inequality is acceptable. Simply beating up on the superwealthy 1 percent or demanding higher taxes “for the rich” doesn’t help.

So when a cash-rich company like Apple stops hoarding its cash or a Wall Street firm tightens up ethics rules for employees, we may be seeing the evolution of financial capitalism toward a better place. And that’s one way to define a good society.