The interests of the executives of Apple diverge from those of their shareholders. The executives have investment portfolios that are highly undiversified. Their incomes depend on the success of Apple. Their reputations would be highly damaged by Apple stumbling or needing to raise new capital. In short, their interests are tied up in the fate of one firm—where outside shareholders' interest are not constrained in this way.

Choosing to hoard cash rather than buy back shares or pay dividends is a choice to preserve the fortunes of management at the expense of shareholders. No doubt many long-term Apple shareholders are fine with this, because their returns have been spectacular.

In fact, this might even be the best explanation for why the market allows Apple to avoid dividends. The safety given to executives by hoarding cash can be viewed as a form of non-taxed, undisclosed compensation. It may even be the cheaper alternative, since managers would otherwise demand higher compensation now to compensate for additional risk-taking.