Apple yields to governance reform call

Boost for Calpers in campaign for greater boardroom accountability

Apple has bowed to investor demands to give shareholders greater influence over the election of directors, a move that will make it far harder for other leading US companies to ignore calls to improve corporate governance standards.

The technology group had disregarded a shareholder vote at last year’s annual meeting calling for the change, but faced renewed pressure from Calpers, the largest US public pension fund, to introduce majority voting for seats in the boardroom at its Thursday meeting.

“It’s vitally important that a company the size and importance of Apple is not lagging behind on governance”, said Anne Simpson, head of corporate governance at Calpers. “A high standard of governance will underpin their future success.”

Before the change, shareholders in the world’s largest listed company could only withhold their vote in favour of the election of a director, rather than vote against. If a director was unopposed, only one vote in favour was required to retain the post, irrespective of how many votes were withheld.

Apple had again opposed the resolution put to the meeting this year sponsored by the California Public Employees’ Retirement System, but changed tack ahead of a vote which was expected to receive substantial support. Apple will adopt a policy that any director not receiving majority shareholder support must resign, and will introduce the new bylaws to complete the change at next year’s meeting.

Apple’s change of stance came at the first annual gathering of shareholders since the death of Steve Jobs, the company’s founder.

The company again declined to lay out plans for its cash hoard of almost $100bn, however. Tim Cook, chief executive, said, “It’s more than we need to run the company”, and that the board has been actively discussing the matter. At present, Apple does not pay a dividend or repurchase its stock.

Calpers’ push for change at one of the fastest growing and most popular US companies had become the centrepiece of a campaign for boardroom accountability. Its victory reflects a growing investor consensus in favour of the corporate governance agenda.

The pension fund has persuaded 77 large US companies to adopt majority voting in the last two years, and is targeting 17 who are holding out – which it has not yet named. “There is a fundamental flaw in US capital markets if shareholders cannot hold boards to account”, said Ms Simpson.

Nearly 80 per cent of S&P 500 companies have now adopted the practice, as have more than half of the Russell 1000 index companies. However, the US is the only developed country not to enforce majority voting for directors. Such rules were included in early drafts of the Dodd-Frank financial reform legislation, but were left out of the final bill passed in 2010.

Calpers owns 0.26 per cent of Apple, a stake worth $1.4bn. It is the largest single stockholding for the pension fund, which has about $230bn assets under management.

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