Apple shareholders will be voting on a significant executive pay shareholder proposal at the company’s annual meeting on February 28th. The proposal, titled “Executive Compensation Reform” will ask shareholders to recommend that Apple “engage multiple outside independent experts or resources from the general public to reform its executive compensation principles and practices.” Despite the frequent criticism by issue activists of the use of independent compensation consultants, the proposal states that “any single consulting firm cannot represent the general public, such as independent scholars, think tanks, unions and academic societies, to advise fair, just and ethical compensation principles.” The proposal also cites Thomas Piketty on income equality in calling for additional “independent experts or sources” to be used to help represent a wider array of views in Apple’s executive pay. The proposal is based on the proponent's views that the same salary, annual incentive and long-term incentive was awarded to five of six executives,calling into question the usefulness of the compensation committee if "it could not differentiate the contribution of the tremendously different functions of" each member of the executive team. Apple, predictably, recommends against the proposal, calling it “unnecessary, not consistent with market practice, and would provide no benefit to Apple or our shareholders” and pointing to the shareholder say on pay support in 2016 of 95% as an indication of the support for its pay practices.
The Center reported on the SEC’s refusal to permit Apple to exclude the proposal by gadfly activist Jing Zhao back in early November only days before Republicans surprisingly stormed to an election day sweep. With the GOP in control of the House, Senate, and the White House, there is an increased potential that issue activists, who previously had a sympathetic ear among regulators, will begin to rely on other approaches for promoting their causes, including shareholder resolutions. Mr. Zhao’s proposal provides an intriguing test case at Apple which although still viewed as the gold standard for company performance is being increasingly questioned because of a lack of innovation.