The following editorial appeared recently in the Los Angeles Times:
The Central Laborers' Pension Fund, a retirement fund for about 6,500 union members in Illinois, has invested a small but non-trivial part of its holdings — almost $4 million — in Apple Inc. stock. And like many other Apple shareholders, the fund's managers are concerned about what might happen to the innovative tech company if it should lose its iconic but ailing chief executive, Steve Jobs. So it called on Apple's board to disclose a detailed "succession planning policy" governing the selection of future top executives.
The board opposed the proposal, and the company's shareholders ultimately rejected it at a meeting last week. Nevertheless, the dispute is emblematic of the tension between companies and investors over how much information shareholders are entitled to receive and how much influence they ought to have over company policies.
The Securities and Exchange Commission didn't require boards to let shareholders vote on proposals related to succession plans until last year, and they rank relatively low on investors' list of priorities. According to Institutional Shareholder Services, only 10 such proposals have surfaced this year.
But for Apple, succession is a particularly important issue, albeit a delicate one. It's important because the company has fared spectacularly well since Jobs retook the helm in 1997. It's delicate because of his serious, recurring health problems, the details of which the company has been loath to divulge.
The Central Laborers' Fund proposal would have required Apple to create and disclose annually a policy regarding succession that would include "criteria for the CEO position which will reflect the company's business strategy," as well as a program to develop internal candidates and an emergency succession plan. The company replied that it already had a comprehensive succession plan but had no intention of releasing it. The union's proposal, Apple said, would force it to reveal sensitive information to competitors and would micromanage matters that should be left to the board and management.
Apple has a point. Shareholders don't run the companies they invest in; that's what its executives do. Nor do they oversee management; that's what the board of directors does. What shareholders should receive is enough information to judge how well the board is protecting their interests. It's understandable why some investors would demand to know more about succession plans at Apple, given how closely associated Jobs is with the company's success over the last decade. But the assurances Apple gave should suffice. And if they don't, investors are free to find another groundbreaking tech company to bet on.
Distributed by McClatchy-Tribune Information Services.
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