Not only has Apple named
Al Gore, former Vice President of the United States, to its Board of Directors, the company has also approved several measures to enhance “corporate governance” (the system by which business corporations are directed and controlled). Apple plans to add another board member, increasing the use of independent committees on the board, and reducing issued stock option overhang from 23 percent to 16 percent.
The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation such as the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. By doing this, it also provides the structure through which the company objectives are set, and the means of attaining those objectives and monitoring performance, according to
Encycogov, the encyclopedia of corporate governance.
In addition to Gore, Apple has launched a formal search for a second independent director; look for a new board member to be named before the end of the summer. Once this person is named, five out of seven Apple directors will be considered independent (under SEC and NASDAQ rules).
Apple’s Board of Directors has also expanded the role of its independent Nominating Committee to include corporate governance as the new Nominating and Corporate Governance Committee, and has beefed up the role of its Audit Committee in accordance with the Sarbanes-Oxley Act and proposed SEC and NASDAQ regulations. These two committees are chaired by independent directors and staffed by a majority of independent directors.
Additionally, the board has approved two measures to reduce Apple’s issued stock options as a percentage of total options and shares outstanding from the current level of 23 percent to 16 percent. The first measure is a voluntary employee stock option exchange program. It lets Apple employees who aren’t executive officers, and who hold options with exercise prices at or above US$25, to exchange them for a lesser number of new stock options priced at fair market value six months and one day after their existing options are canceled.
The second measure is for CEO Steve Jobs to voluntarily exchange his 27.5 million stock options for a new grant of five million restricted shares that will vest on the third anniversary of the grant. The measures are expected to return a net total of over 32 million options back to the company — or approximately seven percent of the total options and shares currently outstanding.
What’s more, the board approved canceling Apple’s non-shareholder approved option plan upon the completion of the employee exchange program and shareholder approval to amend the remaining shareholder-approved executive officer stock plan so it can be used to grant options to all employees.