In a change of policy for the world's biggest company, Apple
Here's why it really doesn't matter either way, but why it does matter for investors that Apple was aware enough and smart enough to take the company in this direction.
You better be good, I'm tellin' you why
After years of pressure from outside groups and years of resistance from the company, Apple has decided to submit its board of directors to a shareholder vote. Beginning next year, all board members must receive a majority of support from Apple shareholders in order to retain their positions.
Previously, if Apple shareholders didn't like a director, they couldn't vote against him or her. They could only abstain from voting. The decision to give shareholders majority vote was announced at this year's annual meeting and will take effect for the first time at next year's meeting.
Once more unto the breach
Corporate governance activists have been after Apple for years to allow majority voting, the biggest and most influential of which is Calpers, the California Public Employees Retirement System. Apple is Calpers' single-largest holding and the biggest public-pension fund in the country.
As such, when Calpers speaks, Apple has to listen. At least year's annual meeting, Calpers actually got a majority vote resolution in play. It wasn't adopted, though, which is why Calpers came back swinging this year, successfully so.
Over the past few years, corporate governance concerns have only gained in prominence. At present, more than 50% of the Russell 1000 use some form of majority voting, as do almost 80% of the S&P 500. Swinging its mighty pension club, Calpers has gotten 77 major American companies on board with the idea over the past two years.
Proxy access: coming soon to a company near you
"Proxy access" is the technical term for and mechanism by which shareholders can nominate directors, and many big American companies will be facing some sort of shareholder reckoning in 2012.
One is Hewlett-Packard
In the forbidding, skyscrapered canyons of Wall Street this year, Goldman Sachs
Let the ends justify the reasons
Apple is making all the right moves these days. Earlier this year it joined the Fair Labor Association, which is conducting an unprecedented inspection of Apple's overseas factories. Now Apple is riding the wave of good corporate governance, too. Wait, you say, didn't Apple, even this year, try and block proxy access, only cynically caving at the last moment when the company realized the substantial support the resolution would have? Yes, but it really doesn't matter.
What matters is that Apple has seen the light, or at least the consequences of not seeing the light, and is taking the appropriate action. Real change is afoot. Shareholder rights are an issue that's here to stay, whether companies like it or not. So they might as well make friends with the zeitgeist and get on board. It's the right thing to do, and the smart thing to do, as Apple has so ably and dramatically demonstrated.
No companies are perfect in this regard, but to paraphrase Voltaire, it's important to never let the quest for the perfect drive out the good.
Fool contributor John Grgurich owns no shares in any of the companies mentioned in this column. The Motley Fool owns shares of Bank of America and Apple. Motley Fool newsletter services have recommended buying shares of The Goldman Sachs Group and Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. 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 has a scintillating disclosure policy.
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