With Jobs on leave, Apple shareholders consider succession plan
Apple’s management will be tested on Wednesday as the company faces a vote on a shareholder proposal asking the company’s board to disclose its CEO succession planning policy.
The proposal calls for Apple’s board of directors to amend the company’s corporate governance policy to adopt a CEO succession planning policy, and annually produce a written report on the plan to shareholders.
The vote will come in the wake of Apple’s announcement in January that CEO Steve Jobs was taking medical leave of absence. The company didn’t specify a reason for the leave or how long he’d be away. Apple’s chief operating officer, Tim Cook, has taken over day-to-day operations in Jobs’ absence.
Jobs has taken multiple leaves of absence, and the company has mostly held back information related to his health, which has been of increasing concern to shareholders. In 2009, businessman Warren Buffett disagreed with Apple’s decision to hold back information on Jobs’ health, saying it was a “material fact” for the company, a criticism others echoed.
The proposal was originally submitted by the Central Laborers’ Pension Fund, and is supported by Laborers’ International Union of North America (LIUNA), which holds around 11,000 Apple shares.
LIUNA wants Apple to revise the corporate governance guidelines so shareholders know that the company is discussing successor plans and has a plan in place in any emergency, said Jennifer O’Dell, assistant director of corporate affairs for LIUNA, who will be at the shareholder meeting.
In a filing with the U.S. Securities and Exchange Commission Apple is recommending that shareholders vote against the proposal, arguing that the board already has a formal evaluation process which recommends development of internal candidates for succession. However, Apple says publicly revealing such plans could expose the company’s confidential plans and objectives, and give competitors access to confidential information, which is not in the best interest of the company and its shareholders.
Apple is misconstruing the proposal, O’Dell said. The proposal isn’t asking the Apple to reveal details such as the name of a successor to the CEO. LIUNA just wants to see proxy statements that Apple’s board has met and is actively discussing succession plans.
“If they do, they have to disclose it to shareholders,” O’Dell said.
O’Dell said the proposal is more about Apple’s long-term value to shareholders, and that the proposal was filed well before the company announced Jobs’ leave of absence.
“We’re eager to see him come back and run Apple on the day-to-day basis,” O’Dell said.
Companies such as Hewlett-Packard and Intel have already approved such shareholder proposals, O’Dell said.
However, there’s no guarantee that such a proposal would be implemented by Apple’s board, LIUNA’s O’Dell said. Even if the proposal gets the majority vote, the board could just review and ignore it.
Apple tends to be paranoid and overprotective about its information, and the idea that competitors could glean some information from succession plans is not valid, said Roger Kay president of Endpoint Technologies Associates.
It’s obvious that the first person in line to succeed Jobs is Cook, with potential candidates including Phil Schiller, who is senior vice president of worldwide product marketing.
“If you’re not in the Apple culture, you won’t be running Apple,” Kay said.
The company would be better off revealing succession plans, or Apple could be exposed to lawsuits relating to the breach of fiduciary responsibility, Kay said. A simple statement that a succession plan has been approved could reduce the risk of lawsuits.
Updated on February 24 to correct a typographical error on which companies have adopted succession plans. Also, Apple shareholders rejected the plan at Wednesday’s meeting. Macworld has a full report on the 2011 Apple shareholders meeting elsewhere on the site.