Apple Shareholders Reject CEO Succession Proposal

Shareholders did right by Apple (Nasdaq: AAPL  ) today. They refused to vote up a proposal that would have required the board to name candidates to replace Steve Jobs as CEO, who is on his third medical leave since returning to the company in 1997.

Please don't misunderstand me. I'm not denigrating the proposal itself or the idea of a succession plan. The Central Laborers' Pension Fund of Illinois showed good intentions in pitching its proposal, but the requirements made it untenable. Here's the breakdown as provided on page 41 of Apple's proxy statement:

  • The Board of Directors will review the plan annually.
  • The Board will develop criteria for the CEO position, which will reflect the Company's business strategy and will use a formal assessment process to evaluate candidates.
  • The Board will identify and develop internal candidates.
  • The Board will begin non-emergency CEO succession planning at least 3 years before an expected transition and will maintain an emergency succession plan that is reviewed annually.
  • The Board will annually produce a report on its succession plan to shareholders.

Apple included a broad rebuttal to the proposal in the proxy, but in reality it comes down to just one line: "By publicly naming these potential successors, Proposal No. 5 invites competitors to recruit high-value executives away from Apple."

I'll understand if you think that sounds like an excuse, but according to data at LinkedIn, ex-Apple employees most often leave for Cisco Systems (Nasdaq: CSCO  ) , Google (Nasdaq: GOOG  ) , and -- wait for it -- Microsoft (Nasdaq: MSFT  ) .

You can bet the board has access to even more detailed statistics, and given the competitive nature of Apple's business, and the company's history of secrecy, it's not in the least surprising to see the Mac maker do whatever it can to hold onto its best talent. With Jobs sick, Apple's bench has never been more important.

Do you agree? Disagree? Let us know what you think about Steve Jobs' health, the performance of Apple's board, and the need for a public succession plan using the comments box below. You can also rate Apple in Motley Fool CAPS.

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Fool contributor Tim Beyers is a member of the Rule Breakers stock-picking team. He owned shares of Apple and Google at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool owns shares of Apple, Google and Microsoft and has written Apple puts and created a bull call spread position in Cisco. The Fool is also on Twitter as @TheMotleyFool. Its disclosure policy recently gave way to a successor.


Read/Post Comments (4) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 24, 2011, at 2:02 PM, IraLA wrote:

    Respectfully, this issue is an old issue of virtually no concern to anybody; and this story was yesterday's news at best.

    Why do you rehash these retreaded, rerun nonevents?

    http://wereport.com

  • Report this Comment On February 24, 2011, at 2:19 PM, TMFMileHigh wrote:

    @IraLA,

    Respectfully, I think this is a timeless issue of concern to everyone that's a shareholder. That's why there's been so much coverage and debate.

    Why do you disavow this as a legitimate issue when Apple routinely loses billions in market value at the very mention of the possibility of Jobs leaving Apple for good?

    No doubt Apple has a talented team and I wouldn't sell if Jobs were to retire today, but let's please stop pretending that investors don't care about this issue.

    FWIW and Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On February 24, 2011, at 5:20 PM, daniinLA wrote:

    Tim,

    I've got to back you up -- my portfolios looking sickly this week with AAPL and NFLX both down -- but I would like to politely ask WHY this is still such a trigger for apple stock prices. OK, first time, maybe even 2nd time... but Mr. Jobs is on his third leave of absence -- at some point shouldn't the market just stop caring? This company has come a long way from a few hotshots in a garage and I think AAPL is showing market strength beyond the influence of one leader. Clearly, I'm wrong, but I don't know why.

  • Report this Comment On February 26, 2011, at 6:16 PM, racchole wrote:

    Steve Jobs presence is very similar to Sam Palmisano of IBM. I would bet that if Palmisano developed an obvious chronic health condition that affected his role as CEO, the IBM stock would suffer in similar fashion to this situation. This is true because Jobs, like Palmisano, enforces an ultra-specific strategy which maximizes the value of his company. Jobs has basically created an "Apple Cult" of sorts among the consumer market. Any product or service that comes from Apple only forces its consumers to become more dependent on Apple for future products and services. Jobs has found a way to create a long-term stream of consumer dependence. It is very possible that when he steps down for good, decisions will be made differently, and Apple dominance will slowly fall from grace. I personally own one share of AAPL just to give me an excuse to track it. While it has been a solid company on an incredible run, it is inevitable at some point that the price will come down. News of Jobs' health and its impact on the stock price only brings forth this inevitable.

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