Apple (NASDAQ:AAPL) Chief Executive Officer Tim Cook was brought before the US Senate’s permanent investigations subcommittee Tuesday, but a good deal of preparation may help him keep the company from running into trouble.
The reason Apple is in the hot seat in the first place is over some questionable tax practices. Just like many other big businesses in the news, Apple has taxes coming from all over and has various ways of moving money around to optimize its earnings. But, occasionally the government believes companies are hiding taxes or finding loopholes that keep them from paying their fair share. That is the case here.
Apple makes a decent chunk of its revenue from abroad, and it can move that money around between subsidiaries to keep it in countries with lower taxes. It can also keep that money abroad to avoid a steep repatriation tax.
Cook went through a lot of trouble to prepare for the meeting. One of the key methods for getting ready was to work with a group that had significant experience in these sorts of matters. That group was the firm O’Melveney & Myers, which had formerly worked to keep Enron, Ford (NYSE:F), and Goldman Sachs (NYSE:GS) out of trouble.
Together, they would have practice sessions to get Cook and other top brass from the company accustomed to the way discussions would go with the Senate committee. The firm worked with the committee’s investigators to find out what could be brought up during the talks, so that Apple would be prepared to discuss them. Proper preparation would allow Apple executives to keep their composure and not be taken off guard.
Another firm that specialized in this sort of case said, “The goal is to make the hearing prep seem more difficult than the hearing is going to be.” If the executives could handle the preparation for the hearing well enough, they should theoretically fair well through the actual hearing.
As a publicly traded company, it’s important for Apple to main a semblance of composure, as it might otherwise look weak and scare investors. Considering Apple’s massive drop in stock over the last seven months, it would be detrimental to the company to run into any further trouble.
Apple’s stock could still be impacted by the hearing even if Cook and the companies other officers perform well before the committee. Since the committee is considering new tax rules, the outcome could worry investors. It might start to look like the government will press hard to get Apple’s foreign revenue taxed more, which would reduce the company’s value and upset shareholders.
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