Apple discourages shareholders from voting for CEO succession plan

on January 10 2011 1:14 PM

Apple has recommended its shareholders to vote against the demand for a CEO succession plan at the Annual Meeting of shareholders in February.

The recommendation is cited in the Proxy Statement filed with the US Securities and Exchange Commission on Friday.

The recommendation discourages the shareholders to vote against the shareholder proposal entitled Amend the Company's Corporate Governance Guidelines to adopt and disclose a written CEO succession planning policy.

The proxy statement states that the Central Laborers' Pension Fund which owns 11,484 shares in the company is aspiring to present a proposal which details the guidelines to find suitable successor to the CEO. The plan demands that the CEO succession plan be annually reviewed by directors, development of specific criteria to select a CEO and a specific plan to develop internal candidates for the profile.

It also expects the Board to commence CEO succession planning at least 3 years before an expected transition and to present annual reports on its succession strategy.

However, Apple is rallying its shareholders to vote against this demand by stating that the succession plan would jeopardize its competitive advantage as it would give the Company's competitors an unfair advantage. Proposal No. 5 would publicize the Company's confidential objectives and plans.

It further stated that proposal would undermine the Company's efforts to recruit and retain executives. The Board believes that 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 to evaluate each candidate. By publicly naming these potential successors, Proposal No. 5 invites competitors to recruit high-value executives away from Apple. Furthermore, executives who are not identified as potential successors may choose to voluntarily leave the Company.

Apple's success is closely tied to its enigmatic CEO Steve Jobs, who sent shivers across the stock market causing suspension of after-hours trading of Apple stocks in January 2009, when he took leave for six months from the position to focus on his health. Steve Jobs was diagnosed with pancreatic cancer and underwent surgery in 2004 to remove a tumor. The issue was further stoked when Bloomberg had mistakenly published an obituary of Steve Jobs in 2008, with date and cause of death left blank which was however corrected by the group. 

Steve Jobs currently holds 5.5 million of Apple's shares. However he received only $1 in salary in 2010. He was receiving the same annual compensation since 1997.