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Why Apple, Inc.'s Board Wants You to Vote Against This Diversity Proposal

By Evan Niu, CFA - Jan 15, 2016 at 10:00AM

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There's a reason why affirmative action has been controversial for decades.

Apple's (AAPL 0.03%) annual shareholder meeting is right around the corner: It takes place on Feb. 26.

The topic of diversity has been coming up a lot lately in Silicon Valley, which is a legitimate issue considering the dominance of white males throughout the tech industry. Many tech giants, including Apple, have now started to release regular diversity reports that lay out statistics regarding their workforces.

With that in mind, you might think that Apple would be supportive of a shareholder proposal to increase diversity at the company's highest levels. You'd be wrong, and here's why it's appropriate for Apple's board to be pushing back.

Aye or nay?
In the proxy statement, an individual shareholder has proposed that Apple implement "an accelerated recruitment policy" that requires the company to increase the diversity of senior management and the board of directors. The shareholder does not believe that minorities are adequately represented. The shareholder believes this is contrary to Apple's stated diversity policies.

Apple's board is recommending that shareholders vote against the proposal.

Four more years! Four more years!
The proposal in question is flawed because it could be analogous to affirmative action, which has been controversial for decades due to the potential for reverse discrimination. Even though Apple senior management and board of directors does include a disproportionate number of white males, that shouldn't undermine the company's overall philosophy toward diversity.

Keep in mind that these are quite qualified white males that have earned their stripes and worked their way to the top. As an investor, I wouldn't want anyone other than Tim Cook running the company right now, and he also happens to be one of the most prominent CEOs that is openly gay.

Apple has added a few women to its executive ranks recently, including Angela Ahrendts (SVP of retail), Lisa Jackson (VP of environmental policy), and Denise Young Smith (VP of HR). African-American James Bell (former longtime Boeing CFO) joined the board just a few months ago, while Andrea Jung (former Avon CEO) has long sat on the board. Apple notes that it actively seeks out qualified women and individuals from minority groups when looking for board nominees.

Since the shareholder proposal focuses only on senior management and the board, we're talking about two relatively small groups of people. That's part of the problem.

Think bigger picture
Apple is very committed to diversity, but on a much larger scale than just its management team or board of directors. It's an important aspect of Apple's culture, so much so that Tim Cook sent out a companywide email just a few months ago when a group of black teenage students were racially discriminated against at an Apple Store in Australia. Cook called the incident "unacceptable" and said it "does not represent [Apple's] values."

At the same time, Cook has acknowledged that while Apple has made progress with diversity, it still has "a lot more work to be done." But implementing a recruitment policy for management and the board that puts gender or race above qualifications is misguided, particularly as Apple has already made it clear that diversity is a core value for the Mac maker.

Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends 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 disclosure policy.

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