January 5, 2012
Shareholder Seeks an Annual Vote on Director Pay at Apple
– Ted Allen, ISS
As I recently blogged: Retail investor activist Jim McRitchie has filed a shareholder proposal at Apple that calls for an annual non-binding vote on outside director compensation at the technology company.
“This proposal is similar to our management’s proposal on this same ballot enabling us to cast a vote in regard to the pay of our executives,” McRitchie wrote in a recent blog posting about his resolution. “This shareholder proposal simply extends the shareholder voting opportunity to apply to our directors. Some of our directors are paid more than $1 million for work that may take less than 400 hours per year–or $2,500-plus per hour.”
In response to this proposal, Apple argues that the compensation for its non-employee directors is “reasonable and appropriate.” The California-based company points out that a substantial portion of directors’ pay is equity-based to “further align” the interests of directors with shareholders. The company said it has retained an independent compensation consultant to review its director pay each year. Apple plans to hold its 2012 annual meeting on Feb. 23.
Two outside Apple directors earned more than $1.07 million in total compensation from the company, while two others received more than $840,000, according to ISS’ 2011 report on Apple.
Investor proposals on director pay have had mixed success in recent years, as most shareholder activists have focused on advisory votes on executive pay, which were mandated by the Dodd-Frank Act of 2010. During the 2011 proxy season, five say-on-director-pay resolutions went to a vote and averaged almost 17 percent support, according to ISS data. The best showing was 46.4 percent approval at Chesapeake Energy, where outside directors receive personal aircraft usage as a perk.
[Broc’s note: This is not the first company to receive this type of “say-on-director-pay” proposal. This blog notes that three companies received this proposal last season.]