stock owners give CEO Jobs a slicing
REFORM PROPOSALS GET STRONG SUPPORT
Article Launched: 05/11/2007 01:33:43 AM PDT
Apple had a chance
Thursday at its annual shareholder meeting to quell the recent furor over
its options backdating. But if what happened at the meeting and the
reaction of some investors are any indication, the discord hasn't gone
At the meeting in
Cupertino Thursday, Apple shareholders asked pointed questions about the
company's backdating controversy, drawing Chief Executive Steve Jobs into
sometimes-testy exchanges. Fueling more criticism, Jobs refused to allow
Apple's board members to answer investor questions, saying the directors
were attending as "guests."
And, in a symbolic
rebuke to management, shareholders appeared to have voted in unusually
large numbers for four investor proposals that sought to rein in executive
pay at the corporation, including one that asked the board to bar stock
options backdating in the future.
"Options backdating is
a cancer eating away at the company," charged Con Hitchcock, a
representative of Amalgamated Bank, while arguing at the meeting for the
labor-backed institution's proposal on backdating.
had limited opportunity to confront Apple's full, seven-member board. Two
of the directors, Al Gore and Jerome York, who investigated Apple's
backdating, did not attend because, as Jobs put it, attending shareholder
meetings "is not the most important thing they do."
Noa Oren, who
represented the International Brotherhood of Teamsters, attempted to ask
William Campbell, Apple's co-lead director and the head of its
compensation committee, about Jobs' pay. But the Apple CEO refused to
allow Campbell to answer.
"I thought that was
outrageous," Oren said.
typically are investors' once-a-year chance to interact with directors -
their elected representatives. Such interactions have gained importance
following the corporate scandals earlier this decade.
"It is appalling that
he would think that he had a right to interpose himself between
shareholders and the board," said Nell Minow, editor of the Corporate
Library, a business research and watchdog organization based in Portland,
Maine. "That showed very poor judgment on his part," added Minow, who owns
Apple shares and voted for the shareholder proposals, but did not attend
Minow also found it
disturing that board members allowed Jobs to bar them from answering
"It's bad enough that
Jobs said that," she said. "`What's really appalling is that none of the
directors objected to him saying that. Where were their spines?"
Jobs defends board
Apple has acknowledged
it regularly backdated stock options in the late 1990s and earlier this
decade. Its board has drawn fire not only for allowing the practice, but
for what some investors and analysts see as a shoddy, compromised internal
investigation into the matter. That investigation found that Jobs received
a large backdated grant, was aware of backdating at the company and picked
favorable dates in some cases. But it found that Jobs didn't commit
wrongdoing. The Securities and Exchange Commission later cleared the
company of wrongdoing.
Apple directors Bill
Campbell, chairman of Intuit; Arthur Levinson, CEO of Genentech; and Eric
Schmidt, CEO of Google, who all attended the meeting, were unavailable for
comment afterward and did not return calls later.
At the meeting,
however, Jobs defended the board from backdating and criticism on
executive pay, saying Apple's directors "do an awfully good job."
"I think we have a
great board," he said.
But even before the
meeting, shareholders and analysts were questioning how well the board was
doing its job. Influential research firms Glass Lewis and Institutional
Shareholder Services both recommended that shareholders vote in favor of
the executive pay resolutions and withhold their votes for the re-election
of most of Apple's board.
Such criticism came
even though Apple's stock is up 50 percent over the past year, its revenue
and profits are soaring and its computers are gaining market share.
Ban on backdating
proposed six non-binding proposals, two of which, related to environmental
concerns, were withdrawn at the meeting. The four remaining proposals,
although defeated, apparently garnered widespread support among Apple
investors. According to a preliminary tally reported by Amalgamated Bank,
about 41 percent of shareholder votes were in favor of the proposal to bar
backdating. Another 41 percent voted in favor of allowing shareholders to
have an advisory vote every year on executive pay at the company. Some 38
percent of shareholder votes were in favor of both forcing Apple's
executives to hold on to a large portion of their shares and tying
executive pay to the company's performance.
said those vote totals came from Apple's investor relations
representative. Apple's investor relations department did not return
repeated calls seeking confirmation.
Company spokesman Steve
Dowling said he couldn't confirm the vote totals, but said he had "no
reason to dispute them."
All of Apple's board
was re-elected, according to Apple, although it did not report vote
But the fact that the
resolutions drew such high support is "very unusual" and could pressure
Apple's board to make changes, governance experts say. Typically, such
proposals draw such high support only at companies whose stocks and
performance have been poor for a number of years, they said.
"It's clear ... there's
a disconnect between shareholders and Apple's board," said Scott Adams, a
representative of the American Federation of State, County and Municipal
Employees union, which made the proposal that Apple executives hold on to
at least 75 percent of their shares in the company.
To be sure, not
everyone came to assail Jobs. In fact, when two shareholders announced
that, in response to Jobs' release of an environmental report last week
they were withdrawing two separate environmental proposals, the audience
cheered. It cheered again when another shareholder rose to praise Jobs for
keeping the company on track despite the backdating investigation and the
company's recent roll-out of computers based on Intel processors.
Brandon Reese, who asked the first question, pressed Jobs to give back
some of his restricted shares, which Reese noted were awarded to Jobs in
exchange for trading in a large options grant that was backdated.
In response, Jobs said
his backdated grant was "approved" by Apple's board in August 2001, but
that he didn't get his shares until October, when Apple's stock was about
50 cents a share higher - which would have made the options worth less.
"I didn't ask the
company to reimburse me," he said.
What Jobs neglected to
say was that his grant was given the October date through documents that
were falsfied the following December, which is when the board actually
approved the grant, according to Apple's own regulatory filings. Had the
grant carried the December date when they were actually approved, they
would have been priced even higher than they were in October.
Troy Wolverton at firstname.lastname@example.org or (408) 920-5021.
Copyright 2007 San Jose