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The term “chemistry,” or your ability to work collegially with the other members, is often used in board searches, and it can make or break the hiring decision. Even today, prickly devil’s advocates are not often sought to fill these spots.
Eleanor Bloxham’s fantastic article in Fortune (Now hiring: Corporate boards. Applicants beware., 12/13/2011) speaks volumes as to why I submitted a “Say on Directors iPay” proposal that will appear on the Apple 2012 proxy. We have a say on the CEO’s pay and the pay of other named executive officers but not on board pay. Yet, at least on paper, the directors are the ones we elect and who negotiate CEO pay on our behalf. Shareowners need to focus more on board members. They are our direct representatives.
At Apple, we are paying at least two directors more than $1M a year; that’s more than $2500 an hour. Two of our directors are full time CEOs. How much time do you think they are putting in on board service?
When you read Apple’s rebuttal to my proposal on next year’s proxy, you will see they spend more time playing down the cost of their “Equipment Program” than they do addressing actual money paid out.
According to Apple, each director gets each new product and can buy products at a discount… and here’s where it gets really rough for them.
Directors are not provided tax gross-ups payments for the taxable income they incur in connection with the equipment program.
Can you imagine? They have to pay taxes on the difference between the cost of any equipment they get at a discount and what they charge their friends for the equipment. They are bragging that Apple provides no tax gross-ups on their equipment program! The implication is that Apple is out ahead of other companies on this issue.
The Apple board doesn’t require a majority vote to get elected either. That means if no one is running against the directors picked by the nominating committee (almost always the case), all it takes is one positive vote. The other 899,999,999 shares could be withheld or could be votes against and the directors would still win. That’s a better deal than Vladimir Putin gets in Russia.
The situation may be even worse at many other companies, since Apple is a great company. With a little more involvement from shareowners it can be even better. See also, Shareholder Seeks an Annual Vote on Director Pay at Apple, ISS, 12/16/2011; The Director Compensation Project: Apple, theRacetotheBottom, 6/8/2011; and The Implications of Say on Director Pay (Part 6), theRacetotheBottom, 12/19/2011.