Score one for the California Public Employees’ Retirement System. The country’s largest public pension fund won in its scrimmage with Apple Inc. about how Apple directors get to stay on board.
Apple shareholders voting at the company’s annual meeting today backed a CalPERS-offered proposal that asks the board of directors to jump on the majority voting bandwagon.
“An election where you can be voted in without a majority is unworthy of a great company like Apple,” said Anne Simpson, CalPERS’ senior portfolio manager who heads its corporate governance program, in a press release. “We strongly urge Apple to make the change that its owners are requesting.”
We’ve discussed the Apple-CalPERS issue in blogs and columns before. On the face it seems a no-brainer. Majority voting means a director running unopposed has to garner more “for” votes than “withhold” votes. Under the current plurality system at Apple, a single “for” vote will get a director another term.
But as we learned, if you are a California-incorporated company such as Apple, life isn’t that simple. As Apple wrote in its proxy filed with the Securities and Exchange Commission, in which it argued against the CalPERS plan, California law makes this a trickier notion.
It is not enough to get more “for” votes than ”withhold” votes. For companies such as Apple, the director has to get “for” votes from a bit more more than 25% of the outstanding shares.
That means low voter turnout could lead to the ouster of a perfectly responsible and perfectly popular director at Apple and other California-incorporated companies.
After this vote, Apple’s board of directors should go ahead and adopt the majority vote rule since shareholders backed it, joining other California-incorporated companies that have taken the plunge.
As I advocated in a Feb. 8 column on the subject, the best answer is to change the law in California to conform with that in other states. Majority voting makes sense but shouldn’t put companies at risk of losing competent directors that shareholders aren’t trying to remove.