Apple Inc

Apple Inc. Proxy Score 47 – ‘For’ Proxy Access

Apple IncApple Inc. (AAPL) meeting on 2/26/2016 provides shareholders an opportunity to vote FOR real proxy access. Apple Inc. designs, manufactures, and markets mobile communication and media devices, personal computers, and portable digital music players to consumers, small and mid-sized businesses, education, and enterprise and government customers worldwide. It is one of the stocks in my portfolio. I will attend the 2/26 meeting in person. had collected the votes of four funds when I checked. I voted against two directors and for proxy access, therefore with the Board’s recommendations 47% of the time. View Proxy Statement.

Read Warnings below. What follows are my recommendations on how to vote the proxy in order to enhance corporate governance and long-term value. 

Apple Inc: ISS Rating

From Yahoo! Finance: Apple Inc.’s ISS Governance QuickScore as of Feb 1, 2016 is 3. The pillar scores are Audit: 1; Board: 1; Shareholder Rights: 1; Compensation: 10. Brought to us by Institutional Shareholder Services (ISS). Scores range from “1” (low governance risk) to “10” (higher governance risk). Each of the pillar scores for Audit, Board, Shareholder Rights and Compensation, are based on specific company disclosures. That gives us a quick idea of where to focus: Compensation.

Apple Inc: Compensation

Apple Inc.’s Summary Compensation Table shows the highest paid named executive officer (NEO) was Senior Vice President of Retail and Online Stores Angela Ahrendts at $25.8M. I’m using Yahoo! Finance to determine market cap ($562.3B) and Wikipedia’s rule of thumb regarding classification. Apple is a large-cap company. According to the Equilar Top 25 Executive Compensation Survey 2015, the median CEO compensation at large-cap corporations was $10.3 million in 2014, so pay is well above that. Apple shares outperformed the NASDAQ over the most recent two, five, and ten year time periods, but underperformed during the most recent one year time period. GMIAnalyst

The MSCI GMIAnalyst report I reviewed gave Apple an overall grade of ‘D.’ According to the report:

  •  Unvested equity awards partially or fully accelerate upon the CEO’s termination. Accelerated equity vesting allows executives to realize pay opportunities without necessarily having earned them through strong performance.
  • The company has not disclosed specific, quantifiable performance target objectives for the CEO. Disclosure of performance metrics is essential for investors to assess the rigor of incentive programs.
  • The company pays long-term incentives to executives without requiring the company to perform above the median of its peer group.
  • A decline has occurred in the CEO’s equity holdings in the company over last year. Diminished executive exposure to company stock may work to reduce the alignment between the CEO’s interests and those of shareholders.

Largely because of these issues and what appears to be excessive pay, I voted against the pay package and against members of the compensation committee, since they recommend the pay package: Andrea Jung (Chair), Al Gore, Art Levinson. I think it is worth noting that Ms. Jung is also on the compensation committee of General Electric Company. An extensive report by As You Sow, The 100 Most Overpaid CEOs: Are Fund Managers Asleep at the Wheel?, found GE in the ranks of the 10 top overpaid CEOs.

Apple Inc: Accounting 

I have no reason to believe the auditor has rendered an inaccurate opinion, is engaged in poor accounting practices, or has a conflict of interest — so voted to confirm.

Apple: Board Proposals

The MSCI GMIAnalyst report began with the following:

Key governance issues at US computer company Apple Inc. include pay practices that feature excessive golden hello awards, a board composition that is populated by a majority of directors who are active or former CEOs at large cap companies, who lack technology sector experience, and a demonstrated hesitance to support shareholder proposals on proxy access considered to be sound governance practice. (my emphasis)

As mentioned above, I voted against members of the compensation committee and to ratify the auditor. With regard to the Qualified Employee Stock Purchase Plan, the $29B remaining from the 2014 plan and unvested/unexercised shares seems perfectly adequate to me, while increasing the individual award limit to $30M seems excessive. I voted against the plan.

Apple Inc: Shareholder Proposals

#5 GHG Target ZeroShareholders request a report assessing the feasibility and setting forth policy options to get to net-zero greenhouse gas emission status for its facilities and major suppliers by 2030. Management opposes because it is duplicative and they would rather spend the small amount of additional money on action. Increased cost for the requested report are minimal. Apple should be a leader in investigating whether or not achieving the goal is feasible. That’s a potential new mission that should have widespread appeal. I voted For. 

#6 Increase Diversity at TopShareholders request that the Board of Directors adopt an accelerated recruitment policy requiring Apple Inc. (the “Company”) to increase the diversity of senior management and its board of directors, two bodies that presently fails to adequately represent diversity (particularly Hispanic, African-American, Native-American and other people of colour). Management opposes focus on top, arguing they are increasing diversity throughout. Yes, and they should continue but a little more focus at the top would help attract top talent below. People needed models. I voted For.

#7 Guidelines for Country SelectionThe proponent requests the Board review the Company’s guidelines for selecting countries / regions for its operations and issue a report, identifying Apple’s criteria for investing in, operating in and withdrawing from high-risk regions. I oppose this initiative. Better to set a good example for human rights around the world that people can admire, even if their own country needs a great deal of improvement.  I voted Against.

#8 Proxy Access. Apple has adopted a ‘lite’ version of proxy access. My proposal seeks a more robust version based on the SEC’s vacated Rule 14a-11. The vast majority of proxy access bylaws adopted by Fortune 500 companies allow shareholders to nominate at least two directors, whereas Apple’s bylaws allow for only one nominee. See my extensive critique at Apple’s Proxy Access Lite Needs Changing ISS urges its subscribers to vote for my proposal to create real proxy access at Apple, as do early vote announcers Trillium, TRS, Australia’s Local Government Super, Canada Pension Plan Investment Board, Christian Brothers Investment Series, Unitarian Universalist Common Endowment, Florida SBA, Calvert, and Domini. I voted For.

Proxy InsightApple Inc: CorpGov Recommendations Below – Votes Against Board Position in Bold

The table below is mostly from but I also checked Proxy Insight, a fantastic resource.

1.1Elect Director James BellForAgainstForForFor
1.2Elect Director Tim CookForAgainstForForFor
1.3Elect Director Al GoreAgainstAgainstForForFor
1.4Elect Director Bob IgerForAgainstForForFor
1.5Elect Director Andrea JungAgainstAgainstForForFor
1.6Elect Director Art LevinsonAgainstAgainstForForFor
1.7Elect Director Ron SugarForAgainstForForFor
1.8Elect Director Sue WagnerForAgainstForForFor
2Ratify Ernst & Young LLP as AuditorsForForAgainstForFor
3Ratify Named Executive Officers’ CompensationAgainstAgainstForForFor
4Amend Qualified Employee Stock Purchase PlanAgainstAgainstForForFor
5Create Feasibility Plan for Net-Zero GHG EmissionsForForForForAgainst
6Increase Diversity of Sr Management & BoardForForForForAgainst
7Report on Guidelines for Country SelectionAgainstAgainstAgainstAgainstAgainst
8Adopt Proxy Access RightForForForForFor

Apple Inc: Issues for Future Proposals Looking at for provisions unfriendly to shareowners:

  • Proxy access provision whereby a group limited to 20 shareholders holding at least 3% of the outstanding common stock continuously for at least three (3) years may nominate directors (one, unless they expand the board), so long as the number of directors elected via proxy access does not exceed 20% of the board. Nominees who receive less than 25% of the votes would be ineligible for nomination under the proxy access provision for the next two (2) annual meetings.

Apple Inc: Mark Your Calendar

A proposal that a shareholder intends to present at the 2017 annual meeting of shareholders and wishes to be considered for inclusion in Apple’s proxy materials must be received no later than September 8, 2016. All proposals must comply with Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). 

Shareholder proposals and director nominations must be delivered to Apple’s Secretary by mail at 1 Infinite Loop, MS: 301-4GC, Cupertino, California 95014, or by email and received by Apple’s Secretary by the dates set forth above.


Be sure to vote each item on the proxy. Any items left blank are voted in favor of management’s recommendations. (See Broken Windows & Proxy Vote Rigging – Both Invite More Serious Crime).I generally vote against pay packages where NEOs were paid above median in the previous year but make exceptions if warranted. According to Bebchuk, Lucian A. and Grinstein, Yaniv (The Growth of Executive Pay), aggregate compensation by public companies to NEOs increased from 5 percent of earnings in 1993-1995 to about 10 percent in 2001-2003.

Few firms admit to having average executives. They generally set compensation at above average for their “peer group,” which is often chosen aspirationally. While the “Lake Woebegone effect” may be nice in fictional towns, “where all the children are above average,” it doesn’t work well for society to have all CEOs considered above average, with their collective pay spiraling out of control. We need to slow the pace of money going to the 1% if our economy is not to become third world. The rationale for peer group benchmarking is a mythological market for CEOs.

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