Proposal No. 5 – Shareholder Proposal
Apple has been advised that the National Center for Public Policy Research, 20 F Street, NW Suite 700, Washington, DC 20001, which has indicated that it is a beneficial owner of at least $2,000 in market value of Apple’s common stock, intends to submit the following proposal at the Annual Meeting:
Charitable Giving – Recipients, Intents and BenefitsTrue Diversity Board Policy
Whereas, in addition to providing benefits to society at-large, charitable contributions should enhance the public image of our company. Increased disclosure about these contributions would provide shareholders with better insight into our corporate giving strategy.
Resolved: The proponent requestsResolved, that the company provideshareholders of Apple Inc. (the “Company”) request the Board adopt a policy to disclose to shareholders the following:
| 1. | | A description of the specific minimum qualifications that the Board’s nominating committee believes must be met by a nominee to be on the board of directors; and | |
| 2. | | Each nominee’s skills, ideological perspectives, and experience presented in a chart or matrix form. | |
The disclosure shall be presented to the shareholders through the annual proxy statement and the Company’s website within six (6) months of the date of the annual meeting and updated on an annual report, omitting proprietary information and at reasonable cost, disclosing: the company’s standards for choosing recipients of company assets in the form of charitable contributions; the business rationale and purpose for each of the charitable contributions, if any; personnel participating in the decision to contribute; the benefits to society at-large produced by company contributions; and a follow-up report confirming the contribution was used for the purpose stated. The report should be published on the company’s website.basis.
Supporting Statement
Absent a system of accountability and transparency, some donated assets may be misused and potentially harm the company’s reputation and shareholder value. Current disclosure is insufficient to allow the company’s Board and shareholders to evaluate the use of corporate assets by outside organizations.
For example, the company has donated to the Center for American Progress (CAP) – an openly left-wing organization that, as reported by the Washington Post, made statements the head of the Anti-Defamation League called “anti-Semitic and borderline anti-Semitic.”
Many support CAP’s leftist policy work, many others do not. Most Americans would acknowledge that donating to an extremely ideological organization in this highly polarized political climate is controversial.
Also, while education advocates would likely applaud the company’s donations of iPads and other equipment to schools through its ConnectED program, certain labor unions and their political allies would likely oppose the company’s ConnectED donations to charter schools.
Furthermore, according to public reports, the company donated to the Clinton Foundation. Public reports indicate that the FBI is investigating or has investigated that organization for possible public corruption. Media reports also strongly imply that individuals and corporations may have sought preferential treatment from government actors in exchange for donations to the Clinton Foundation. The Clinton Foundation has many supporters who would support the company’s donation, but it also has many detractors that would disapprove of this type of giving.
Fuller disclosure would provide enhanced feedback opportunities from which our company could make more fruitful decisions. Corporate philanthropy should be transparent to better serve the interests of the shareholders.
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Apple’s Statement in Opposition to Proposal No. 5
The Board recommends a vote AGAINST Proposal No. 5.
Apple already provides detailed information about our core values and our most significant charitable contributions on our website atapple.com/diversity/creating-opportunities andapple.com/product-red. Apple’s largest charitable contributions, which are made only following extensive internal vetting and approval from one or more of our executive officers, focus on some of the most important issues facing our communities today. For example:
| • | | Apple supports the advancement of education. Apple has joined President Obama’s ConnectED initiative and pledged $100 million to bring technology and services into 114 underserved schools across the United States. Under this program, we are donating an iPad to every student, a Mac and iPad to every teacher, and an Apple TV to every classroom, as well as services and professional development for teachers. There are now more than 50,000 students learning, creating, and exploring on iPad through our ConnectED commitment, and 96% of those students are eligible for a free or reduced-price lunch program.
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| • | | Apple supports health in the fight for an AIDS-free generation. When our customers buy (PRODUCT)RED™ Apple products, Apple contributes to the Global Fund to provide counseling, testing, and medical care to those most affected by the AIDS epidemic. So far, (PRODUCT)RED has raised over $360 million for the Global Fund, including nearly $120 million through Apple.
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| • | | Apple supports inclusion and diversity. Apple has launched a multiyear, $40 million partnership with the Thurgood Marshall College Fund. The TMCF in turn creates opportunities for students from public and private historically black colleges and universities who are pursuing careers in the tech industry. Apple does not just give money to the TMCF; we work collaboratively with the fund to advance its goals. For example, Apple hired 33 students from these institutions as summer interns in 2016, and as part of the TMCF partnership, also hosted them for a weeklong immersion at Apple’s campus several months ahead of time to provide them with a foundation of Apple culture and values to help pave the way for a successful experience.
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Apple publicly discloses detailed information about the cost and impact of these initiatives on our website.
Apple also supports many other organizations that share our core values, such as American Red Cross, The Conservation Fund, Grace Hopper Celebration of Women in Computing, Mercy Corps, National Center for Women & Information Technology, National Society of Black Engineers, and World Wildlife Fund. In September 2011, Apple implemented a matching gifts program where Apple matches employee contributions of money, Apple products, or volunteer time to eligible nonprofit organizations. In certain cases, Apple matches cash contributions on a 2-for-1 basis, such as in cases of natural disasters or other major humanitarian crises. Apple has contributed to more than 11,000 different charitable organizations through this matching gifts program.
Apple believes in leaving the world better than we found it. We actively support our communities through philanthropic activities. The requested report would do nothing to advance these philanthropic activities, and would provide immaterial incremental additional information. Apple believes it is better to focus our efforts on actively supporting our communities than to divert time and resources to the preparation of a report that would have limited value to shareholders.
For all of the reasons above, the Board recommends a vote AGAINST Proposal No. 5.
Vote Required
Approval of Proposal No. 5 requires the affirmative vote of (i) a majority of the shares present or represented by proxy and voting at the Annual Meeting and (ii) a majority of the shares required to constitute a quorum.
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Proposal No. 6 – Shareholder Proposal
Apple has been advised that Mr. Antonio Avian Maldonado, II is a beneficial owner of at least $2,000 in market value of Apple’s common stock, and Zevin Asset Management, 11 Beacon Street, Suite 1125, Boston, MA 02108, is a beneficial owner of at least $2,000 in market value of Apple’s common stock. Mr. Maldonado’s address will be supplied promptly upon oral or written request. Apple has been advised that Mr. Maldonado and Zevin Asset Management intend to submit jointly the following proposal at the Annual Meeting:
RESOLVED:
Shareholders request that the Board of Directors adopt an accelerated recruitment policy requiring Apple Inc. (the “Company”) to increase the diversity of senior management and its board of directors, two bodies that presently fail to adequately represent diversity and inclusion (particularly Hispanic, African American, Native American and other people of color).
Stockholder Supporting Statement
The tech industry is characterized by the persistent and pervasive underrepresentation of minorities and women in senior positions as detailed in a 2014 U.S. Equal Employment Opportunity Commission report. According to a USA Today analysis of 2014 Computing Research Association data, “[t]op universities turn out black and Hispanic computer science and computer engineering graduates at twice the rate that leading technology companies hire them.”1 The Company is at an advantageous position to be a leader in promoting diversity in senior management and its board of directors, based on its size, breadth and position as one of the largest companies in the world.
Shareholders are concerned that low levels of diversity at the Company’s senior management and board level, as well as painstakingly slow improvements, are a business risk.
According to the Company’s website, “Diversity is critical to innovation and it is essential to Apple’s future.”2 Further, the Company has stated in multiple Proxy Statements that it is “committed to actively seeking out highly qualified women and individuals from minority groups to include in the pool from which board nominees are chosen.”3
Shareholders believe that companies with comprehensive diversity programs, and strong commitment to implementation, enhance their long-term value, reducing the Company’s potential legal and reputational risks associated with workplace discrimination and building a reputation as a fair employer. Equally, shareholders believe the varied perspectives of a diverse senior management and board of directors would provide a competitive advantage in terms of creativity, innovation, productivity and morale, while eliminating the limitations of “groupthink”, as it would recognize the uniqueness of experience, strength, culture and thought contributed by each; strengthening its reputation and business. This is confirmed by McKinsey & Company, which found companies with highly diverse executive teams had higher returns on equity and earnings performance than those with low diversity, and a May 2014 study found gender diverse teams were better at driving “radical innovation”.4 “Diversity helps companies react more effectively to market shifts and new customer needs.”5
1http://www.usatoday.com/story/tech/2014/10/12/silicon-valley-diversity-tech-hiring-computer-science-graduates-african-american-hispanic/14684211/
2https://www.apple.com/diversity/
3 http://investor.apple.com/secfiling.cfm?filingid=1193125-14-8074&cik=320193
4Diversity Matters, McKinsey & Company, November 2011.
5Diversity wins!, McKinsey & Company, November 2011.
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Therefore, shareholders ask the Company to assist investors in evaluating the company’s effectiveness in meeting its commitment to equal opportunity and diversity in senior management and board of directors, in a meaningful way that would not cause the company to breach the assurances of confidentiality and privacy that it has made to its employees. Currently shareholders have insufficient information to determine if the company has been successful in expanding diversity.
We urge shareholders to vote FOR the proposal.
Apple’s Statement in Opposition to Proposal No. 6
The Board recommends a vote AGAINST Proposal No. 6.
Our ongoing efforts to increase diversity are much broader than the “accelerated recruitment policy” requested by this proposal, which is focused only on Apple’s senior management and Board. At Apple, we take a holistic view of inclusion and diversity that includes the varied perspectives of our employees as well as app developers, suppliers, and anyone who aspires to a future in tech. We also support diversity by creating opportunities beyond Apple. Here are just a few examples:
| • | | Apple has joined President Obama’s ConnectED initiative and pledged $100 million to bring technology and services into 114 underserved schools across the United States. Under this program, we are donating an iPad to every student, a Mac and iPad to every teacher, and an Apple TV to every classroom, as well as services and professional development for teachers. There are now more than 50,000 students learning, creating, and exploring on iPad through our ConnectED commitment, 92% of whom are of Alaskan Native, Asian, Black, Hispanic, or Native American heritage.
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| • | | Apple has been working with the National Center for Women & Information Technology for more than a decade, and in 2015, we became the first-ever lifetime partner with the NCWIT, expanding a joint commitment to help double the talent pool of women available for technology jobs by 2019. This commitment includes a new initiative targeted towards giving Latinas the inspiration to explore tech studies and careers.
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| • | | Apple launched a multiyear, $40 million partnership with the Thurgood Marshall College Fund. The TMCF in turn creates opportunities for students from public and private historically black colleges and universities who are pursuing careers in the tech industry. Apple does not just give money to the TMCF; we work collaboratively with the fund to advance its goals. For example, Apple hired 33 students from these institutions as summer interns in 2016, and as part of the TMCF partnership, also hosted them for a weeklong immersion at Apple’s campus several months ahead of time to provide them with a foundation of Apple culture and values to help pave the way for a successful experience.
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Apple publicly discloses information about our inclusion and diversity initiatives and detailed statistics about our progress to date atapple.com/diversity. As disclosed on this dedicated website, our hiring trends over the last three years show steady progress in attracting more women and under-represented minorities (defined as groups whose representation in tech has been historically low — Black, Hispanic, Native American, Native Hawaiian, and Other Pacific Islander). In addition, Apple is cultivating diverse leadership and tech talent through on-campus training, events, and programs.
The examples above are evidence of the high level of support from our senior management of our holistic view of inclusion and diversity.
Our Board shares this commitment to increase diversity. Pursuant to its charter, the Nominating Committee of the Board actively seeks out highly qualified women and individuals from minority groups to include in the pool from which Board nominees are chosen. Our current eight-person Board includes two women and members of diverse ethnic groups.
The “accelerated recruiting policy” called for by this proposal is not necessary or appropriate because we have already demonstrated our commitment to a holistic view of inclusion and diversity and made detailed information about our inclusion and diversity initiatives, and the progress we have made with respect to these initiatives, available on our website
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atapple.com/diversity. A substantially similar proposal was presented by Mr. Maldonado at the 2016 annual meeting of shareholders and received the support of less than 5% of votes cast. We believe that the low level of support for this proposal last year reflects the positive recognition by our shareholders of Apple’s significant commitment to inclusion and diversity.
For all of the reasons above, the Board recommends a vote AGAINST Proposal No. 6.
Vote Required
Approval of Proposal No. 6 requires the affirmative vote of (i) a majority of the shares present or represented by proxy and voting at the Annual Meeting and (ii) a majority of the shares required to constitute a quorum.
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Proposal No. 7 — Shareholder Proposal
Apple has been advised that Mr. James McRitchie, 9295 Yorkship Court, Elk Grove, CA 95758, who has indicated he is a beneficial owner of at least $2,000 in market value of Apple’s common stock, intends to submit the following proposal at the Annual Meeting:
Proposal 7 – Shareholder Proxy Access Amendments
RESOLVED: Shareholders of Apple, Inc. (the “Company”) ask the board of directors (the “Board”) to amend its “Proxy Access for Director Nominations” bylaw, and any other associated documents, to include essential elements for substantial implementation to better facilitate meaningful proxy access by more shareholders as follows:
1. The number of “Shareholder Nominees” eligible to appear in proxy materials shall be 25% of the directors then serving or 2, whichever is greater. Current bylaws restrict Shareholder Nominees to 20% of directors. Under the current 8-member board, shareholder nominees are currently limited to nominating one. Any shareholder nominee elected under the current bylaws could be easily isolated.
2. No limitation shall be placed on the number of shareholders that can aggregate their shares to achieve the 3% “Ownership Requirements” for “Eligible Shareholders.” Under current provisions, even if the 20 largest public pension funds were able to aggregate their shares, they would not meet the 3% criteria at most of companies examined by the Council of Institutional Investors. Allowing an unlimited number of shareholders to aggregate shares will facilitate participation by individuals and institutional investors in meeting the Ownership Requirements.
3. No limitation shall be imposed on the re-nomination of “Shareholder Nominees” based on the number or percentage of votes received in any election. Such limitations do not facilitate the shareholders’ traditional state law rights and add unnecessary complexity.
Supporting Statement:
The SEC’s universal proxy access Rule 14a-11 (https://www.sec.gov/rules/final/2010/33-9136.pdf) was vacated after a court decision regarding the SEC’s cost-benefit analysis. Therefore, proxy access rights must be established on a company-by-company basis. Subsequently, Proxy Access in the United States: Revisiting the Proposed SEC Rule (http://www.cfapubs.org/doi/pdf/10.2469/ccb.v2014.n9.1) a cost-benefit analysis by CFA Institute, found proxy access would “benefit both the markets and corporate boardrooms, with little cost or disruption,” raising US market capitalization by up to $140.3 billion. Public Versus Private Provision of Governance: The Case of Proxy Access (http://ssrn.com/abstract=2635695) found a 0.5 percent average increase in shareholder value for proxy access targeted firms.
Proxy Access: Best Practices
(http://www.cii.org/files/publications/misc/08_05_15_Best%20Practices%20-%20Proxy%20Access.pdf) by the Council of Institutional Investors, “highlights the most troublesome provisions” in recently implemented proxy access bylaws.
Although the Company’s board adopted a proxy access bylaw in 2015, it contains troublesome provisions, as outlined above, that significantly impair the ability of shareholders to participate as Eligible Shareholders, the ability of Shareholder Nominees to effectively serve if elected, and the ability of Shareholder Nominees to run again if they receive less than 25% of the vote. Adoption of all the requested amendments would largely remedy these issues and would better ensure meaningful proxy access by more shareholders.
Increase shareholder value
Vote for Shareholder Proxy Access Amendments – Proposal 7
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Apple’s Statement in Opposition to Proposal No. 7
The Board recommends a vote AGAINST Proposal No. 7.
Our current corporate governance framework reflects our commitment to robust, balanced governance practices combined with responsiveness and accountability to shareholders. Our existing proxy access bylaws, which Apple proactively adopted in 2015 and further enhanced in 2016, establishes a prudent and effective mechanism for proxy access, making adoption of this proposal unnecessary and unwarranted.
In 2015, after careful consideration of the varying viewpoints and feedback offered by many shareholders, the Board amended Apple’s bylaws to adopt proxy access. The bylaws permit a shareholder, or a group of up to 20 shareholders, owning at least 3% of Apple’s outstanding shares of common stock continuously for at least three years, to nominate and include in Apple’s annual proxy materials director nominees constituting up to 20% of the Board, provided that the shareholder(s) and nominee(s) satisfy the procedural and eligibility requirements specified in the bylaws. The Board currently consists of eight directors, and shareholders may nominate one proxy access candidate.
But we did not stop there. After initially amending our bylaws to provide for proxy access, we continued to closely monitor proxy access developments and reach out to many of our largest shareholders, governance experts, and advisors to discuss evolving market practice and trends and the preferences of our shareholders. As a result of these engagements, in December 2016, the Board adopted enhancements to Apple’s bylaws to streamline our proxy access framework and make it easier for shareholders to nominate proxy access candidates. These enhancements included the following changes:
| • | | Apple no longer requires shareholders who nominate a proxy access candidate to recall loaned shares and hold them through the annual meeting. Ownership of loaned shares is deemed to continue if the shareholder(s) has the power to recall the loaned shares on five business days’ notice.
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| • | | Apple increased the availability of proxy access by limiting the circumstances under which the maximum number of proxy access candidates is reduced. For example, Apple no longer reduces the number of proxy access candidates when an incumbent director was nominated through proxy access in the last two years and is subsequently supported by the Board for re-election.
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| • | | Shareholders may now re-nominate a proxy access candidate regardless of the level of support received at the annual meeting. This change renders moot the amendment requested in point 3 of the proposal.
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| • | | Apple has extended the deadline by which nominating shareholders and proxy access candidates must provide certain information to Apple to ten business days from five business days.
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| • | | Apple has narrowed the scope of a nominating shareholder’s indemnification obligations to legal and regulatory violations arising out of a nominating shareholder’s actions or communications with Apple shareholders or out of information provided by a nominating shareholder to Apple.
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| • | | Apple has limited the discretion of the Board to unilaterally interpret the proxy access provisions.
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We believe our proxy access framework strikes the right balance between promoting shareholder nomination rights and protecting the interests of our shareholders. Our framework is a reasonable, usable one that reinforces the Board’s accountability and provides broad discretion to shareholders to nominate candidates of their choosing, while mitigating the risk of misuse of proxy access, including utilization by shareholders pursuing objectives that are not broadly supported by other shareholders. Implementation of the changes requested by the proposal beyond those Apple has already made would make Apple an outlier among public companies that have adopted proxy access.
Beyond mere proxy access, Apple’s bylaws also keep directors accountable to shareholders by providing for an automatic termination of service of any incumbent director who fails to be elected by an affirmative vote of a majority of the shares represented and voting in an uncontested election. Some companies merely require a director to submit a resignation letter
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under similar circumstances, and give the board of directors discretion as to whether to accept the resignation – potentially allowing the director to remain on the board indefinitely. Apple believes that our process, which results in automatic termination of the director’s term, fosters greater accountability and responsiveness to shareholders.
The Board has also shown an ongoing commitment to board refreshment and to having highly qualified directors who bring diverse perspectives to the Board’s decision-making processes. Through the Board’s robust director nomination and annual self-evaluation process, two new directors have been added since 2014.
We are committed to ensuring effective, balanced corporate governance while also continually engaging with shareholders. This is evidenced by Apple’s proactive adoption of proxy access in 2015 and shareholder-favorable enhancements in 2016, and by the other actions Apple has taken to ensure that shareholders are given a voice, many of which are described in this Proxy Statement. The Board believes that these objectives are being achieved through Apple’s current governance processes and that changing our proxy access framework as outlined by the proponent is therefore unnecessary and unwarranted.
For all of the reasons above, the Board recommends a vote AGAINST Proposal No. 7.
Vote Required
Approval of Proposal No. 7 requires the affirmative vote of (i) a majority of the shares present or represented by proxy and voting at the Annual Meeting and (ii) a majority of the shares required to constitute a quorum.
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Proposal No. 8 – Shareholder Proposal
Apple has been advised that Mr. Jing Zhao, 262 Altadena Circle, Bay Point, CA 94565, who has indicated he is a beneficial owner of at least $2,000 in market value of Apple’s common stock, intends to submit the following proposal at the Annual Meeting:
Shareholder Proposal on Executive Compensation Reform
Resolved: shareholders recommend that Apple Inc. engage multiple outside independent experts or resources from the general public to reform its executive compensation principles and practices.
Supporting Statement
AccordingWe believe that boards that incorporate diverse perspectives can think more critically and oversee corporate managers more effectively. By providing a meaningful disclosure about potential Board members, shareholders will be better able to Apple Notice of 2016 Annual Meeting of Shareholders, “Since 2014,judge how well-suited individual board nominees are for the Compensation Committee has engaged the services of Pay Governance LLC,… on matters for which the Compensation Committee is responsible.” (p.26). However, any single consulting firm cannot represent the general public, such as independent scholars, think tanks, unionsCompany and academic societies, to advise fair, justwhether their listed skills, experience and ethical compensation principles. The failure of our executive compensation principles and practices is clearly shownattributes are appropriate in the same $1,000,000 salary, the same $20,000,105 stock award and the same $4,000,000 non-equity incentive plan compensation each in 2015 to our five of six named executive officers (p.35). What is uselight of the Compensation Committee whenCompany’s overall business strategy.
The Company’s compliance with Item 407(c)(2)(v) of SEC RegulationS-K requires it could not differentiateto identify the contributionminimum skills, experience, and attributes that all board candidates are expected to possess.
True diversity comes from diversity of the tremendously different functions of the CFO, the Retail and Online Stores SVP, the Internet Software and Services SVP, the Hardware Engineering SVP and the Secretary of our company?
As Professor Thomas Piketty (Capital in the Twenty- First Century, trans. Arthur Goldhammer. Cambridge: The Belknap Press of Harvard University Press, 2014) stated, “therethought. There is absolutely no doubtample evidence that the increaseCompany – and Silicon Valley generally – operate in ideological hegemony that eschews conservative people, thoughts, and values. This ideological echo chamber can result in groupthink that is the antithesis of inequalitydiversity. This can be a major risk factor for shareholders.
We believe a diverse board is a good indicator of sound corporate governance and a well-functioning board. Diversity in board composition is best achieved through highly qualified candidates with a wide range of skills, experience, beliefs, and board independence from management.
We are requesting comprehensive disclosures about board composition and what qualifications the United States contributedCompany seeks for its Board, therefore we urge shareholders to the nation’s financial instability.” (p.297) “Let me return now to the cause of rising inequality in the United States. The increase was largely the result of an unprecedented increase in wage inequality and in particular the emergence of extremely high remunerations at the summit of the wage hierarchy, particularly among top managers of large firms.” (p.298) “Because it is objectively difficult to measure individual contributions to a firm’s output, top managers found it relatively easy to persuade boards and stockholders that they were worth the money, especially since the members of compensation committees were often chosen in a rather incestuous manner.” (p.510)vote FOR this proposal.
For the purpose of this proposal, the Board and the Compensation Committee have the flexibility to select multiple independent experts or sources.Apple Inc. | 2019 Proxy Statement | 55
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