Apple shareholder proposal for more executive compensation oversight coming to vote in 2017

Posted:
in AAPL Investors edited November 2016
An Apple shareholder has filed a request that Apple implement independent oversight of executive compensation, and Apple's bid to deny the filing has failed, forcing the company to put the proposal to a shareholder vote.




Shareholder Jing Zhao declared to the U.S. Securities and Exchange Commission (SEC) on June 13 that Apple lacked "fair, just and ethical compensation principles" due to the company's lack of independent oversight by a single firm. Zhao quotes from Thomas Piketty's controversial "Capital in the Twenty-First Century" analysis and claims that compensation packages like Apple's, and other companies like it, have led to "rising inequality in the United States" from the selection of compensation committees in a "rather incestuous manner."
Publications by Zhao's group include "Prison Memoirs of an Anarchist," "Memoirs of a Revolutionary," "The Anarchist Lesson from the Spanish Civil War," and the "Chinese Anarchist Archives."
Apple attorney Gene Levoff countered the claims with the SEC in early October, saying that Apple's oversight was sufficient, the proposal as written was vague, and that Apple's evaluation team was allowed, and fully in compliance with NASDAQ rules.

After a response a week later by the original filer, the SEC has denied Apple's request to put aside the shareholder request, forcing the company to take the matter to a vote during the 2017 general shareholder's meeting, barring legal challenge.

Background of the filing, and the filer

Piketty's treatise, quoted heavily in the filing, decries concentrated wealth persisting even after industrialization contributed to rising worker wages, and quality of life, with only disruptive world wars and the great depression disrupting the pattern.

Zhao is the founder of the Comparative Policy Research Institute, a self-proclaimed "independent think tank focusing on comparative social, economical, political, and industrial policy issues" comprised mainly of Chinese researchers, scientists, economists, and engineers with experience in Japan that reside mainly in Silicon Valley. Zhao and has personally owned at least 30 shares of Apple stock since June 2014, according to memorandum attached to the SEC filing, making him eligible to make these requests of the company.

Publications by Zhao's group include "Prison Memoirs of an Anarchist," "Memoirs of a Revolutionary," "The Anarchist Lesson from the Spanish Civil War," and the "Chinese Anarchist Archives."

Apple's path forward

The shareholder's request won't necessarily be welcomed by the voters with open arms, however. The same individual requested Google form a wide-reaching "human rights" committee including evaluation of the same matter in 2010, and filed the same request using much the same wording with Goldman Sachs in 2013 which also ended in defeat.

Additionally, Apple has a wide berth in how it may put the matter to a vote. The proposal does not specify who must comply with the proposal specifically, how abstention votes are counted, which class of shareholder may vote, nor does it put forth minimum parameters for compliance.
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Comments

  • Reply 1 of 24
    I have to say that I agree with this. Infinite pay decreases motivation and innovation. Personally, I don't believe any executive should gross more than 30x the amount of money paid to their lowest paid employee or contractor. 
    dysamoriasingularityEcky-Thumppaxmanadm1
  • Reply 2 of 24
    lkrupplkrupp Posts: 6,092member
    Great way to chase off top talent!
    thewhitefalconmacseekermike1mwhiteJanNLmasnick
  • Reply 3 of 24
    lkrupplkrupp Posts: 6,092member
    I have to say that I agree with this. Infinite pay decreases motivation and innovation. Personally, I don't believe any executive should gross more than 30x the amount of money paid to their lowest paid employee or contractor. 
    Price and wage control. Yeah, that always works. You socialists are hilarious.
    edited November 2016 macseekermike1ericthehalfbeemwhitepscooter63JanNLmasnick
  • Reply 4 of 24
    I mean, I think Eddy is paid too much, but I have no interest in giving any credence to Pinckney's work of manure. 
    entropys
  • Reply 5 of 24
    dysamoriadysamoria Posts: 1,722member
    Well at least one person was aligned with the workers here...
    adm1
  • Reply 6 of 24
    lkrupp said:
    I have to say that I agree with this. Infinite pay decreases motivation and innovation. Personally, I don't believe any executive should gross more than 30x the amount of money paid to their lowest paid employee or contractor. 
    Price and wage control. Yeah, that always works. You socialists are hilarious.
    Socialism is a method of income distribution. Capitalism is a method of production. The two are not mutually exclusive and I would argue you need both for a healthy economy (consumers have money to spend and producers have money to expand).  

    You uneducated plebeians are hilarious. 
    adm1hmm
  • Reply 7 of 24
    RezRez Posts: 19member
    Mainly Chinese? Why don't you do that in China instead....
  • Reply 8 of 24
    mtbnutmtbnut Posts: 189member
    So Apple stock has probably made this guy trillions, and it sounds like he wants even more. Maybe Cook and company can become janitors for BART (if you don't know the story, Google 'BART janitor' right now).
    edited November 2016
  • Reply 9 of 24
    mtbnutmtbnut Posts: 189member
    Personally, I don't believe any executive should gross more than 30x the amount of money paid to their lowest paid employee or contractor. 
    Where did 30x come from? Is that calculated, or pulled from the nether regions? (I don't mean that flippantly, just seeing if that's a standard formula.)

    An Apple retail specialist makes $15/hr., which is about $32K per year (standard 40hr work week), which would put Cook at about $936k per year. Does that include stock options or just straight up salary?
    edited November 2016 imperialforces
  • Reply 10 of 24
    lkrupp said:
    I have to say that I agree with this. Infinite pay decreases motivation and innovation. Personally, I don't believe any executive should gross more than 30x the amount of money paid to their lowest paid employee or contractor. 
    Price and wage control. Yeah, that always works. You socialists are hilarious.
    Actually, he's right when he says that as pay increases, after a certain point motivation and performance decreases. This was the results of experiments done by economists at MIT. Check out this great short cartoon about the subject. https://www.bing.com/videos/search?q=the+more+you+pay+someone+the+less+motivated+they+become+TED+talk&view=detail&mid=8674603B0C3B3E1F23118674603B0C3B3E1F2311&FORM=VIRE Also, as a long-term shareholder. I find the management's huge stock options as bad for the company, as it was for ENRON. I think this quote sums it up quite well. http://qz.com/65295/giving-a-ceo-too-many-stock-options-can-make-a-company-perform-worse/ "Conventional wisdom has it that paying company bosses with a lot of stock and options aligns their interests with those of shareholders. But a working paper from three researchers in the US and the UK suggest equity-heavy pay packages do exactly the opposite: Depress returns for years to follow" Apple's executive pay structure is hurting the company and I for one will be voting accordingly.
    adm1
  • Reply 11 of 24
    entropysentropys Posts: 1,115member
    lkrupp said:
    I have to say that I agree with this. Infinite pay decreases motivation and innovation. Personally, I don't believe any executive should gross more than 30x the amount of money paid to their lowest paid employee or contractor. 
    Price and wage control. Yeah, that always works. You socialists are hilarious.
    Socialism is a method of income distribution. Capitalism is a method of production. The two are not mutually exclusive and I would argue you need both for a healthy economy (consumers have money to spend and producers have money to expand).  

    You uneducated plebeians are hilarious. 
    I think you mean income redistribution.  In any case you are too limiting. It isn't just income. Both systems are a method of resource allocation, and socialism sees a larger role for the power of government in that than capitalism does.  Socialism directs production too.  Look at Venezuela for a modern example of what happens when socialism has too large a role, or you can look at the outcome of any socialist country in the 20th century.  But too little government does not protect people's rights and property. Most modern social democracies have a blend of each, and the issue is getting the balance right.

    Anyway, one could argue quite successfully that executive salaries are seriously out of whack. Does anyone seriously believe these dudes would quit Apple if their salaries and bonuses were halved? And if Eddie did leave, so what? Some other person would be champing at the bit for a tenth of what he gets.  And they would be so keen to prove themselves we would probably get better product too. They have been able to get away with increasing their salaries to ludicrous levels only because of a happy conjunction of crony big business and crony government. Well happy for them anyway.
    edited November 2016 paxman
  • Reply 12 of 24
    mtbnut said:
    Personally, I don't believe any executive should gross more than 30x the amount of money paid to their lowest paid employee or contractor. 
    Where did 30x come from? Is that calculated, or pulled from the nether regions? (I don't mean that flippantly, just seeing if that's a standard formula.)

    An Apple retail specialist makes $15/hr., which is about $32K per year (standard 40hr work week), which would put Cook at about $936k per year. Does that include stock options or just straight up salary?
    Good question. I don't remember the source, as that particular number was part of something like a TED Talk or a Big Think video. The number was tied to a incentive/motivation study. The context was that in europe, executives are paid around 10-30x their lowest paid worker, but in the United States our executives are paid upward of 300x, far overpaying for their utility. Executives also rotate on corporate boards, getting bonuses for short term gains regardless of what the long term implications for their strategies are. I would highly recommend subscribing to TED if you havent already. 

    Edit: I think the 30x limit is gross, including stocks and bonuses (those are just another form of compensation anyways). 
    edited November 2016
  • Reply 13 of 24
    entropysentropys Posts: 1,115member
    All that would happen with a 30x limit is rather than a maximum, that that is what they all end up getting.  There would also be an explosion in perks to get around he limit.   And a fixed ratio like that doesn't make much sense anyway. Why not 20x? Or 40x? Too arbitrary.  

    Maybe A solution is is to somehow change the role of big funds, part of the crony system of big business and big government that has developed these days, in shareholder votes. Do the investors in those funds get any say in how their share block is used? Otherwise grass roots shareholder initiatives like this don't get full consideration.

    back to Zhao though.  Quoting Picketty. Seriously? He has a credible case, why wreck it linking to that spreadsheet dilitante?
    edited November 2016
  • Reply 14 of 24
    Anyone else here thought Sog35 might be behind this?  ;)

    lkrupp said:
    I have to say that I agree with this. Infinite pay decreases motivation and innovation. Personally, I don't believe any executive should gross more than 30x the amount of money paid to their lowest paid employee or contractor. 
    Price and wage control. Yeah, that always works. You socialists are hilarious.
    Oh you Americans and your anti-Socialist rhetoric. You're the funny ones because you're clearly confusing Communism with Socialism.
  • Reply 15 of 24
    Anyone else here thought Sog35 might be behind this? 

    lkrupp said:
    I have to say that I agree with this. Infinite pay decreases motivation and innovation. Personally, I don't believe any executive should gross more than 30x the amount of money paid to their lowest paid employee or contractor. 
    Price and wage control. Yeah, that always works. You socialists are hilarious.
    Oh you Americans and your anti-Socialist rhetoric. You're the funny ones because you're clearly confusing Communism with Socialism.
    The differences between Communism, Socialism and Progressivism are not that great. They're all collectivist philosophies, which oppose individual liberty.
    edited November 2016 entropys
  • Reply 16 of 24
    Anyone else here thought Sog35 might be behind this? 

    lkrupp said:
    I have to say that I agree with this. Infinite pay decreases motivation and innovation. Personally, I don't believe any executive should gross more than 30x the amount of money paid to their lowest paid employee or contractor. 
    Price and wage control. Yeah, that always works. You socialists are hilarious.
    Oh you Americans and your anti-Socialist rhetoric. You're the funny ones because you're clearly confusing Communism with Socialism.
    The differences between Communism, Socialism and Progressivism are not that great. They're all collectivist philosophies, which oppose individual liberty.
    Ah, our resident sage on all matters -ism has spoken...  :)
    edited November 2016 hmm
  • Reply 17 of 24
    entropys said:

    back to Zhao though.  Quoting Picketty. Seriously? He has a credible case, why wreck it linking to that spreadsheet dilitante?
    Who's the "spreadsheet dilitante [sic]" to whom you refer? Zhao or Piketty?

    If the latter, your level of ignorance about a rather impressive -- regardless of whether you agree with it or not -- piece of empirical economics (as is this blog post author's and Zhao's drivel) is rivaled only by your lack of ability to spell.  
    edited November 2016
  • Reply 18 of 24
    I mean, I think Eddy is paid too much, but I have no interest in giving any credence to Pinckney's work of manure. 
    Who's 'Pinckney'?
  • Reply 19 of 24
    Really surprised that Sog has not chimed in on this.
  • Reply 20 of 24
    entropysentropys Posts: 1,115member
    entropys said:

    back to Zhao though.  Quoting Picketty. Seriously? He has a credible case, why wreck it linking to that spreadsheet dilitante?
    Who's the "spreadsheet dilitante [sic]" to whom you refer? Zhao or Piketty?

    If the latter, your level of ignorance about a rather impressive -- regardless of whether you agree with it or not -- piece of empirical economics (as is this blog post author's and Zhao's drivel) is rivaled only by your lack of ability to spell.  
    I confess I tried to read it, I really did. Then end up skimming through. The most impressive bit was the size of it. I am not alone of course, it is right up there on the most unread bestseller list. Cheap virtue signaling really.  On the quality of his data, income inequality figures are notoriously difficult and need to be taken with a grain of salt. Not treated as gospel.
    SpamSandwich
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