Apple Computer Does It Again – With A Raft Of Annual Meeting Gaffes: How Can Such A Smart Company Be So Dumb On Ir Matters?
Let’s say for starters that we LOVE Apple Computer. We bought when it was around $7…and love it more every day. We love their products too. And we love Steve Jobs – and think he is one of the smartest, savviest, most-focused and most dedicated managers in the world. And a famously successful micro-manager to boot…Usually. But golly…What ARE they thinking in the IR department?
Back in 2009 Apple made the Annual Meeting “blooper of the year” by boasting that the shareholder proposal to have a say-on-pay was soundly defeated…only to have to admit, after a web-watcher immediately smelled a rat, that they had counted the Abstain Votes as No votes (!!)…and the proposal had, in fact, passed handily.
This year, their Annual Meeting results made headlines yet again…in a New York Times article focusing on “Apple’s Secrecy Vs. Governance” – which chided them for saying at the meeting that “shareholders had defeated the suc cession-planning proposal, but [Apple] did not report the vote tallies, something that is standard procedure at many big companies [and] instead slipped the results into a fil ing with the SEC the next day”… implying that the 30% vote in favor, was, in fact, big news that Apple intentionally tried to bury.
We went to the Apple website at once – and were literally taken aback by the astonishingly sparse – and incredibly balky – Investor Relations page: We found the 8-K – after much hunting around – and it did seem to us to be pretty well “buried” – especially in light of Apple’s basic and otherwise wildly successful business of providing in formation technology – and all kinds of information at one’s fingertips.
This little visit caused us to re-read the Apple proxy statement – and especially their recommendations on the succession-planning proposal - and on the majority voting proposal too (which got 73.6% in favor despite Apple’s recommendation to vote no) and where we had told a reporter the Apple discussion struck us as “disingenuous at best.” And wow! The back-story here seemed even worse:
The Central Laborers’ Pension Fund proposal asked the Board to “adopt and disclose a written and detailed succession planning policy (italics ours) with five specific features. The Board’s recommendation AGAINST asserted that adopting it “would give the Company’s competitors an unfair advantage…publicize the Company’s confidential objectives and plans…undermine the Company’s efforts to recruit and retain executives… requires a report identifying the candidates being considered for CEO…[and] By naming these potential successors, Proposal 5 invites competitors to recruit high-value executives away [while] executives who have not been identified as successors may choose to voluntarily leave the Company.”
Did we see any of this called for in the shareholder proposal? No. Would we really imagine that proponents expected the Board to make these kinds of detailed dis closures in the annual “report on its succession plan to shareholders”? Frankly, this strikes us as being closer to a material misstatement of the proposal, rather than merely being “disingenuous.”
The Directors’ recommendation against Proposal No. 6 – to “Adopt a Majority Voting Standard for Director Elections” also struck us as being badly reasoned at best…and mislead ing at worst: Noting that “Under California’s statutory majority vote requirement, election of a director requires not only the affirmative vote of a majority of the shares represented and voting at the meeting, but also the affirmative vote of more than half of the shares requires for a quorum…which equals just over 25% of the outstanding shares” …the Directors’ statement went on to say “Apply ing this standard would mean that even if there were no “Withheld” votes with respect to a director, and thus no indication of shareholder disapproval, that director would still fail to be elected if he or she did not obtain the affir mative vote of more than 25% of the outstanding shares. Apple could therefore lose its directors simply because too few shareholders cast their votes.”
Hey Apple! Aren’t your folks supposed to be whiz kids where mathematics – and logical thinking are concerned? Putting aside for the moment the fact that rounding up fewer than 25% of the votes to elect a director would indeed be a sign of significant shareholder disapproval…how likely is it, re ally, for this to happen…given the fact that Apple, almost certainly has more than 50% of its shares held by institutional investors – who always vote? In fact, the quorum at this year’s meeting was 81.86%...So it is virtually impossible to imagine a scenario where Apple directors would get less than 25% in favor…unless investors were very seriously ticked off…which majority voting is meant to indicate to Directors!
Bottom line: Work a lot harder on being as user-friendly to your basically happy investors as you are to your customers, Apple…before we DO start to get ticked off at Directors where honestly, the woeful drafting of “their” Recommendations has served them poorly.