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For an explanation of the pro forma vote counts used in reports of support for shareholder proposals, see

For Apple's response to the article below, see


Mercury News, April 24, 2009 article



The people and companies driving the innovation of Silicon Valley


Apple finds new way to deny investors ’say on pay’

Posted by Troy Wolverton on April 24th, 2009 at 6:07 pm

Sometime in the last year, Apple seems to have changed the way it tallies shareholder votes.


At its annual meeting with investors in February, Apple announced that shareholders had voted down all investor-sponsored proposals, including a widely watched one that urged the company to allow shareholders to vote every year on its executive compensation practices.

The result was something of a surprise, given that a similar say-on-pay proposal had passed the previous year and the say-on-pay movement has been gaining strength ever since.

Because Apple doesn’t immediately report voting tallies, it wasn’t immediately clear how much the vote had shifted year over year to turn a victory into a defeat for shareholder activists.

Apple finally cleared up the matter on Thursday when, inside its latest quarterly financial report, it released the voting results from its meeting. And, indeed, there were significant changes in the “say on pay vote.”

To wit, shares voted in favor of the proposal increased by more than 20 million shares; shares voted against it increased by nearly 11 million; and shares that abstained from voting fell by nearly 19 million.

“But wait a second,” you might say, “the net results of that change means that more votes at Apple were cast in favor of ’say on pay’ this year than last.” Which might lead you to wonder how the resolution passed last year and failed this year.

To which I’d respond: Exactly.

Inside its quarterly report, Apple noted that if you combine the number of shares that voted against “say on pay” with those that abstained from voting on the matter, some 51.7 percent of shares voted at this year’s meeting did not vote in favor of the resolution. To put it a different way, only 48.3 percent of total votes were voted in favor of it.

But, as can be gleaned from the numbers above, if that’s the way Apple counts shareholder votes, “say on pay” was even more clearly defeated last year, when only 45.7 percent of total shares were voted in favor of the proposal. So, why did it report that the proposal won last year?

Apple spokesman Steve Dowling couldn’t immediately explain the discrepancy, but said he would look into it.

What seemed clear last year was that Apple, when tallying shareholder votes, threw out those that abstained. If you do that and look just at those shares that were voted for or against “say on pay,” you find that about 50.7 percent of shares voted in favor of the proposal last year. That proportion rose to 51.6 percent of shares at this year’s meeting.

As might be expected, that’s how shareholder activists look at the tallies and expect companies to do so too. Including abstentions in determining whether a shareholder proposal passed or failed is rare in corporate America, said Scott Adams, a pension analyst at the American Federation of State, County and Municipal Employees (AFSCME) union, which sponsored the “say on pay” proposal at Apple’s meeting this year. Adams charged that Apple changed the rules after losing the vote on such a basis last year.

“Clearly, they’re trying to game an election,” he said. “It’s clear that Apple doesn’t care what shareholders say (about) improving corporate governance at the company.”

Whether or not abstentions should be counted in tallying shareholder votes isn’t necessarily all that clear. Shareholder activists point to an obscure memo from Securities and Exchange Commission staff to support their position. But at least some companies have it in their bylaws that abstentions must be counted and included as a vote not in favor of a proposal.

What is clear, though, is that companies can’t just randomly change their methodology from year to year, noted Gary Lutin, chairman of the Shareholder Forum, a group which has held a series of discussions among investors about “say on pay” and other corporate governance-related issues.

“People can argue for either one method or the other for calculating votes, but you do have to be consistent about it,” Lutin said.

Regardless of how Apple tallies the votes, what has been consistent is that shareholders representing a sizable portion of Apple shares favors having a “say on pay” at the company.

Since 2007, the number of shares voted in favor of the proposal has grown from 230.5 million to 266.3 million. Including not just abstentions, but non-voted shares, those in favor “say on pay” at Apple have gone from about 26.7 percent of all shares to 29.9 percent.

(In contrast, the shareholder proposal that was the next most popular after “say on pay” at this year’s Apple meeting was supported by shareholders representing about 90 million shares or just 10 percent of all outstanding shares.)

What’s also been consistent is the company’s resistance to adopting “say on pay” — or even somehow responding to shareholder support for the issue — no matter its popularity among shareholders at Apple, its support among investors in general or the wider political climate.

Along those lines, Dowling declined to comment on how Apple might respond to this latest vote on “say on pay.” Adams, of course, was more than willing to comment on how Apple has responded in the past.

Apple’s “still got the iron first of Steve Jobs and his belief that shareholders’ voices are not important,” he said.

Apple’s governance practices have been under scrutiny since at least the turn of the millenium, when the company’s board awarded CEO Steve Jobs two massive stock options grants and an airplane worth $90 million, including the taxes the company paid on Jobs’ behalf that he owed for the receipt of the plane.

Such concerns were revived in 2006 when the company acknowledged that Apple officials had backdated thousands of options grants in preceding years, that Jobs had been the beneficiary of a backdated grant, that the CEO was aware that others were backdated and that he had even helped pick dates for certain grants.

Apple’s internal investigation cleared Jobs of wrongdoing, though, and federal investigators declined to press charges against him.

More recently, though, Apple’s governance again raised the ire of investors with how the board has handled information about Jobs’ health. Despite reports and widespread speculation that Jobs was inpoor health, Apple said little about his status for months. Earlier this year, Jobs issued a statement saying he was essentially fine. Then little more than a week later, he turned around and said he was essentially taking a five-month sabbatical from the company.





This Forum program is open, free of charge, to anyone concerned with investor interests relating to shareholder advisory voting on executive compensation, referred to by activists as "Say on Pay." As stated in the posted Conditions of Participation, the Forum's purpose is to provide decision-makers with access to information and a free exchange of views on the issues presented in the program's Forum Summary. Each participant is expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants.  It is a Forum rule that participants will not be identified or quoted without their explicit permission.

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