Apple’s board is not the longest-tenured board in the S&P 500, but it is, as one critic has called it, too small and too long in the tooth.
But corporate gadfly and editor of corpgov.net James McRitchie’s campaign to unseat non-executive chairman Arthur Levinson and former Vice President and climate hero Al Gore was eventually unsuccessful, according to voting results filed by the company following its AGM earlier this month.
McRitchie’s objections were based on the duo’s tenure, as highlighted by Egan-Jones Proxy Services, of 19 and 16 years respectively.
Egan-Jones recommends against directors with 10 or more years of tenure, since they are considered “affiliated” and therefore no longer independent, an important distinction for an ‘independent’ chairman. There is yet another director with 10 plus years of tenure, former Avon CEO Andrea Jung.
Jung, who is also on the boards of Unilever and Wayfair and was the only director to receive much of a protest vote – of almost 5% of shareholders – at both this and last year’s meetings, has a tenure of 11 years.
“I could have also voted against [Robert] Iger [Disney CEO] for too many commitments,” said McRitchie in an email to RI, “Jung for long-term service, and [Sue] Wagner, since she sits on the board of BlackRock, which owns 6.3% of Apple. But 16 and 19 years are long times. Fresh perspectives could be helpful.”
Two other proxy advisory services, ISS and Glass Lewis, did not recommend voting against any Apple directors. ISS’s proxy research report said: “No significant issues are highlighted at this time.” Glass Lewis raised a minor concern that James Bell sits on four public company audit committees including Apple’s, which is a lot of commitment.
However, since he was CFO of Boeing, his expertise renders this issue “acceptable at this time”. GL’s proxy paper said: “We do not believe there are substantial issues for shareholder concern as to any of the nominees.”
In an announcement of his intentions prior to the meeting, McRitchie said he would be voting “AGAINST directors Levinson and Gore, as well as pay [the Say on Pay resolution] and the auditor [for excessive tenure].”
And he would vote “FOR shareholder proposal #4 Proxy Access Amendments [his own proposal] and against #5, which aims to set up an ideological litmus test for directors.”Proposal number five was submitted by right wing policy group National Center for Public Policy Research which called for a skills matrix for directors because it believes that “True diversity comes from diversity of thought” and it believes that Silicon Valley operates in a liberal “ideological hegemony”. Proposal five was trounced at the ballot box, but McRitchie’s own proposal received almost 30% support.
Although most shareholders did not agree (the votes against Gore and Levinson increased by only tenths of a percentage point) McRitchie does have a point.
Gore has served as chairman of Generation Investment Management, an investment management firm, since 2004, and as a partner of Kleiner Perkins Caufield & Byers, a venture capital firm, since 2007.
He is also chairman of The Climate Reality Project; all which would make him pretty busy.
But, in fact, his commitments pale in comparison with Levinson’s who is not only CEO of Calico, a company focused on health, ageing, and well-being, but also, according to his biography, on six separate ‘selected’ directorships and memberships, indicating that he is on far more boards than, for example, the Broad Institute of Harvard and MIT and the five others given.
In addition to overcommitment, the issue of Apple’s board size exacerbates most of the issues McRitchie raises. Two or three directors with excessive tenure on a regular-sized board would not necessarily be of so much concern, but Apple’s board is tiny, with only seven non-executives and a total board size of eight.
And that is the impetus for McRitchie’s own shareholder proposal. Apple has instituted proxy access, but it was careful to allow for shareholder nominees of only “20% of directors rounded down to the nearest whole number”. That whole number is, of course, one.
In a normal sized board – where most proxy access rules allow for either a minimum of two directors to be nominated or 25% of the board – this would not be a problem, but for Apple’s it is a concern. While ISS recommended a vote for McRitchie’s proposed amendments, GL recommended against.