Mystery helps Apple’s sales but not its governance

By Rob Cox
February 25, 2011

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Rob Cox

The mystique that Apple cloaks itself in when launching snazzy gadgets has served its bottom line well. But that same opacity doesn’t translate well to corporate governance.

It took Apple’s board far too long this week to reveal that, with its visionary leader Steve Jobs sick, 30 percent of its shareholders wanted more information on how the company would be run in the event he does not return to his position. Given Apple’s stunning success, the low profile of the pension fund proposing the measure and the board’s recommendation against, that should send a powerful message.

Late Thursday, Apple dropped into a regulatory filing the fact that 172 million shares were voted in favor of a proposal put forward by the Central Laborers’ Pension Fund, which has under $1 billion of assets, calling for the company to adopt and disclose an executive succession plan policy. With 400 million shares cast in opposition, or 70 percent of the vote, the company clearly prevailed.

But a more mainstream governance proposal from a far larger investor, the $200 billion-plus Calpers, did get passed against the recommendation of the board. And even with the CLPF’s effort, it’s rare for non-traditional proposals from relatively unfamiliar special interests to capture so many votes. That’s particularly true when boards in good standing with their stockholders recommend against them. Apple shares have, after all, roughly doubled in each of the past five years, so shareholders should be happy.

The support for the CLPF suggests many investors do want the company to be more forthcoming. That might also apply to the manner in which Apple reported the voting at Wednesday’s annual meeting. At the time, it said shareholders defeated the succession planning proposal but it didn’t reveal the vote tallies, something that is standard procedure at many big companies like Ford Motor and Goldman Sachs.

Apple instead slipped the results into a filing with the Securities and Exchange Commission the following day. That smacks of unnecessary reluctance to keep shareholders promptly informed. Whatever happens to Jobs, the company needs to do better at separating the justified secrecy of its product launches from keeping shareholders in the dark.


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Interesting the Mr. Cox sees a contrast between Apple’s secretive nature toward product plans/announcements and its behavior toward investors. Apple’s stance is pretty consistent throughout – “We’ll decide what’s best, and we’ll do it without interference from those forces that would seek to control us because it is the only way the creativity that drives the company can flourish”.

There’s not an excess of trust between most boards, management teams and investors. It will be interesting to see if they can sustain this element of their culture when Mr. Jobs is no longer at the helm.

Posted by earthshiva | Report as abusive

I’m sure Jobs reply would be “If you don’t like it, sell your stock.” He’s been keeping people in the dark for years.

Posted by dleary | Report as abusive