Apple Executives Must Hold Triple Their Salary in Stock
Apple Inc. earlier this month reversed its stance on a corporate governance measure related to executive compensation,
by implementing a new rule that executives must hold triple their base salary in company stock.
The move, which hasn't been previously been reported, came even though a month earlier Apple's board urged
shareholders to oppose a very similar corporate governance measure proposed by a shareholder.
Apple's new executive stock holding requirement was implemented Feb 6., according to a notice of the policy under a "
corporate governance" tab on its website. The date was about a month after it issued its proxy statement and three weeks
before Wednesday's annual meeting. The California Public Employees' Retirement System, the biggest U.S. public pension
fund, had been lobbying in favor of the change.
An Apple spokesman declined comment beyond the proxy and the notice.
The move comes as Apple has been facing intensifying heat from shareholders anxious about the company's sliding stock
price, growing cash pile and mounting competitors.
Earlier this month, hedge-fund manager David Einhorn sued the company has part of a broader effort to compel it to
return more cash to shareholders. Apple's stock price has sagged more than 30% since an all-time high reached in
On Wednesday, shareholders narrowly approved an advisory vote on executive compensation. The measure passed with only
61% support from votes tallied before the meeting. Last year, a similar vote passed with 83% of votes.
At the meeting, shareholders also defeated a proposal to implement an executive stock-holding requirement. The
proposal, brought by small individual shareholder and corporate governance advocate James McRitchie, asked Apple to "
adopt a policy requiring that senior executives retain a significant percentage of shares acquired through equity pay
programs until reaching normal retirement age." The proposal recommended a share retention percentage requirement of 33%
of shares acquired through pay-equity programs.
In its Jan. 7 proxy, Apple urged shareholders to vote against the measure on the grounds it "could undermine the
Company's ability to attract and retain executives." It also stated that the company believed it would provide "no
benefit to the Company" and highlighted that Mr. Cook and board members already have stock-holding requirements.
The measure failed to pass, garnering only 29.7% of the votes tallied before the Wednesday's shareholder meeting.
Some shareholders were aware of Apple's changes. Calpers expressed its support for the advisory vote on pay and
foreshadowed the changes in a Web posting.
The posting cited Apple's planned "new requirements for executive stock ownership and retention" as part of its reason
for endorsing the measure. The notice also endorsed Mr. McRitchie's proposal about stock retention because "we
understand from the Company that they are planning to introduce these requirements."
Calpers discussed the new executive ownership requirement with the Apple board before the meeting, according to Anne
Simpson, head of corporate governance for Calpers, declining to elaborate. The fund has long regarded executive stock
ownership "as standard good practice," she said. "It's part of our conversation with all companies we engage." Ms.
Simpson said in an interview that "there are other changes in the works related to executive pay."
Activist investors have long favored executive ownership rules in order to align management's interests more closely
with shareholders. Such requirements are hardly new, however.
As long ago as 1993, more U.S. companies were trying to get their executives to think like owners rather than as hired
help by setting up mandatory or voluntary guidelines for stock ownership. These rules typically require or strongly
encourage senior managers to invest a multiple of their annual salaries in stock. Executives often have several years to
reach the ownership targets.
Apple's new policy requires executive officers to hold three times their annual base salary in stock, and executives
have five years to satisfy it. The document also restates the company's existing policy of requiring the CEO to hold 10
times his annual base salary and directors to hold five times their annual retainer both of which were mentioned in the
January proxy. Board members' retainers start at $50,000 a year, certain committee chairs earning more.
The new executive requirement was implemented in the days when Apple's proxy was under attack by another Apple
shareholder, Mr. Einhorn. Mr. Einhorn, who has been lobbying for Apple to return more of its cash to shareholders,
opposed a proposal that would require the company to receive shareholder approval before issuing preferred stock. He
urged the company to drop the proposal on Feb. 1 and Feb. 6, according to court documents submitted by Apple, and he
sued the company on Feb. 7. Calpers supported Apple's proposal before Mr. Einhorn's lawsuit.
After a federal judge sided with Mr. Einhorn, Apple dropped the measure from the meeting. The company's General
Counsel Bruce Sewell said at Wednesday's shareholder meeting that the company planned to reintroduce the proposal at a
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