Proposal_no_5

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Proposal_no_5

  1. 1. PROPOSAL NO. 5 Shareholder Proposal Entitled “Amend the Company’s Corporate Governance Guidelines to Adopt and Disclose a Written CEO Succession Planning Policy”The Company has been advised that Central Laborers’ Pension Fund, P.O. Box 1267, Jacksonville, Illinois 62651, abeneficial owner of 11,484 shares of the Company’s common stock, intends to submit the proposal set forth belowat the Annual Meeting. RESOLVED: That the shareholders of Apple, Inc. [sic] (“Company”) hereby request that the Board of Directors initiate the appropriate process to amend the Company’s Corporate Governance Guidelines (“Guidelines”) to adopt and disclose a written and detailed succession planning policy, including the following specific features: • The Board of Directors will review the plan annually; • The Board will develop criteria for the CEO position which will reflect the Company’s business strategy and will use a formal assessment process to evaluate candidates; • The Board will identify and develop internal candidates; • The Board will begin non-emergency CEO succession planning at least 3 years before an expected transition and will maintain an emergency succession plan that is reviewed annually; • The Board will annually produce a report on its succession plan to shareholders. SUPPORTING STATEMENT: CEO succession is one of the primary responsibilities of the board of directors. A recent study published by the NACD quoted a director of a large technology firm: “A board’s biggest responsibility is succession planning. It’s the one area where the board is completely accountable, and the choice has significant consequences, good and bad, for the corporation’s future.” (The Role of the Board in CEO Succession: A Best Practices Study, 2006). The study also cited research by Challenger, Gray & Christmas that “CEO departures doubled in 2005, with 1228 departures recorded from the beginning of 2005 through November, up 102 percent from the same period in 2004.” In its 2007 study What Makes the Most Admired Companies Great: Board Governance and Effective Human Capital Management, Hay Group found that 85% of the Most Admired Company boards have a well defined CEO succession plan to prepare for replacement of the CEO on a long-term basis and that 91% have a well defined plan to cover the emergency loss of the CEO that is discussed at least annually by the board. The NACD report identified several best practices and innovations in CEO succession planning. The report found that boards of companies with successful CEO transitions are more likely to have well-developed succession plans that are put in place well before a transition, are focused on developing internal candidates and include clear candidate criteria and a formal assessment process. Our proposal is intended to have the board adopt a written policy containing several specific best practices in order to ensure a smooth transition in the event of the CEO’s departure. We urge shareholders to voteFOR our proposal.The Company’s Statement in Opposition to Proposal No. 5The Board of Directors recommends a vote AGAINST Proposal No. 5.The Company recognizes that a highly talented and experienced management team, not just the CEO, is critical toApple’s success. Accordingly, the Board already implements many of the proposed actions and 41maintains a comprehensive succession plan throughout the organization. While the Board strongly supports theconcept of succession planning, it recommends a vote against Proposal No. 5 for the following reasons.As noted, the Company already fulfills several of the requests proposed. The Company’s Corporate GovernanceGuidelines, available publicly on the Company’s website, require the Board and CEO to conduct an annual review
  2. 2. of succession planning for senior management, including the CEO. As part of this annual review, the Board has aformal evaluation process in which it identifies and recommends development of internal candidates for successionbased on criteria that reflect Apple’s business strategy.Furthermore, adopting Proposal No. 5 would give the Company’s competitors an unfair advantage. Proposal No. 5would publicize the Company’s confidential objectives and plans. Giving competitors access to this information isnot in the best interest of the Company or its shareholders.Proposal No. 5 would also undermine the Company’s efforts to recruit and retain executives. The Board believesthat the Company’s success depends on attracting and retaining a superior executive team, including the CEO.Proposal No. 5 requires a report identifying the candidates being considered for CEO, as well as the criteria used toevaluate each candidate. By publicly naming these potential successors, Proposal No. 5 invites competitors to recruithigh-value executives away from Apple. Furthermore, executives who are not identified as potential successors maychoose to voluntarily leave the Company.Proposal No. 5 attempts to micro-manage and constrain the actions of the Board. In practice, the Board and themanagement of the Company are best equipped to carry out succession planning, as well as to handle day-to-dayhiring, promotion and termination decisions. Such decisions take into consideration numerous criteria that arecontinually adapted to meet the evolving demands of the Company and should not be constrained by arbitrary rulessuch as the three-year “non-emergency CEO succession planning” in Proposal No. 5. The Company takessuccession planning seriously, and the Board has adopted a comprehensive process to ensure continuity andmaintain the superior quality of its management team. This process also allows flexibility to adjust to unanticipatedchanges in the market. As such, the Company is already substantially fulfilling the request in Proposal No. 5, andthe Board recommends a vote against Proposal No. 5.Vote RequiredApproval of Proposal No. 5 requires the affirmative vote of (i) a majority of the shares present or represented byproxy and voting at the Annual Meeting and (ii) a majority of the shares required to constitute the quorum.Recommendation of the BoardThe Board recommends a vote AGAINST Proposal No. 5.

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