It did not take a smart reporter very long to sniff out a problem with the way Apple reported its 2009 voting results – especially with regard to the “widely watched” Say on Pay proposal, which Apple reported had been defeated.
“The result was something of a surprise, given that a similar say-on-pay proposal had passed the previous year and the say-on-pay movement has been gaining strength” Troy Wolverton of the Mercury News reported on April 24th. Further, “shares voted in favor of the proposal increased by more than 20 million shares; shares voted against it increased by nearly 11 million and shares that abstained from voting fell by nearly 19 million”.[vs. last year] “Which might lead you to wonder how the resolution passed last year and failed this year” Wolverton wrote.
Wolverton’s article sought reactions from AFSCME spokesperson, Scott Adams, who alleged that “Clearly, Apple is trying to game an election. It’s clear the Apple doesn’t care what shareholders say [about] improving corporate governance at the company [they’ve] still got the iron fist of Steve Jobs and his belief that shareholders’ voices are not important” he asserted.
Apple cleared up the mystery by filing an amendment to its 10-Q and issuing a press release on April 27th noting that “Last week’s filing incorrectly reported the voting percentages for shareholder-submitted proposals because abstentions were counted as ‘No’ votes…due to human error, which Apple regrets. As a result of the corrected vote count, Shareholder Proposal No. 5 Regarding Advisory Vote on Compensation…was approved by a majority of the votescast.”
And, in an even bigger reversal, after apparently realizing what deaf-and-dumb klutzes they appeared to be, the release announced that “The Compensation Committee of Apple’s Board of Directors has been closely following the Say on Pay issue [Duh!] and…Even if [anticipated legislation to mandate S-O-P] does not occur, Apple is committed to implementing an advisory Say on Pay next year.”
Too bad that Apple [currently our best performing investment, and a company we actually love] did not read our article last year’s big reporting snafu at Yahoo, and our advice to pay particular attention to voting outcomes that seem counterintuitive – especially when they are what you’ve been rooting for – as was the case in both situations.
Apple, and its Inspector of Election too, seem to have fallen victim to the legalistic lingo that many companies have been inserting in their proxy statements this year, to the effect that abstentions – and so called broker non-votes too – “are equivalent to votes against a proposal”. This is true to a degree…to the extent that one needs votes to PASS a proposal. But this most certainly does not mean that you can count abstentions, or broker non-votes either, as votes no.
Another theory about counting votes seems to be circulating widely – especially among California based companies – that abstentions can be considered as “votes cast”…and that therefore, they should be included in the denominator (as Apple did) when calculating and reporting percentages. One proxy statement that just crossed our desk baldly asserted that since California law was “silent” on the matter, abstentions would be equivalent to votes against the matters at hand and would be treated as such when the percentages were calculated.
Forget California’s alleged “silence”…and maybe forget for just a second that abstentions do not count as “votes cast” by the SEC in determining whether a proposal has received enough votes to be resubmitted…and maybe forget the fact that this wacky rationale can work against YOU, when YOU want to pass something…But please do not forget the plain English language: An “abstention” is an “abstention”; it is decidedly NOT a “vote” (otherwise, we would not need the word abstention in English)…And it is decidedly NOT a “vote cast” in our own understanding of the English language and in our own Inspector of Elections book. It is an intentional action to NOT “cast a vote”, and to make a record of that fact. All this confusion on what should be “basics” prompted us to include a little primer on tabulating and reporting voting results, which follows.
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