Apple Inc., facing behind-the-scenes pressure from some shareholders to add more female directors and executives, has...

 

  

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Apple Inc., facing behind-the-scenes pressure from some shareholders to add more female directors and executives, has taken a step to address the criticism and diversify its board. The move follows objections from shareholders Trillium Asset Management Ltd, and the Sustainability Group, who said they are disappointed that the iPhone maker has only one woman on its eight-member board, and one incoming female member of the executive team that reports to Chief Executive Officer, Tim Cook. The shareholders met with Apple representatives several times in the past few months and said they would bring the issue to a vote at a February 28 shareholder meeting. They said however, they backed off after Apple added language to the charter that promises to consider women and minorities as board candidates. "There is a general problem with diversity at the highest echelon of Apple," said Jonas Kron, director of shareholder advocacy at Boston-based Trillium, which manages $1.3 billion. "It's all white men". The new language shows how scrutiny of Apple's diversity practices has now taken on greater significance after other Silicon Valley companies faced questions over their male-dominated leadership ranks. Social-networking companies Facebook Inc. and Twitter Inc. were criticized leading up to their initial public offerings for not having any female directors. Diversity Issues Only 17 percent of board seats on Fortune 500 companies and 15 percent of executive officer positions were held by women in 2013, according to a report by Catalyst Inc., a non-profit researcher. "There is a lot of room for improvement," said Larisa Ruoff, who runs shareholder advocacy and corporate engagement for the Sustainability Group. "We live in an increasingly complex global marketplace, and the companies that can hire, attract, and retain women and people of color are better equipped to capitalize on global opportunities and avoid missteps that may not be apparent to a more homogeneous group." Board Makeup Andrea Jung, the former CEO of Avon Products Inc., is the lone woman and person of color on Apple's board, which otherwise includes seven white men all over the age of 50. Angela Ahrendts, the former CEO of Burberry Group Plc, will be the only woman on the company's executive team when she takes over Apple's retail operation in the first half of this year. Adding more gender, generational and cultural diversity to a board improves financial performance and corporate governance, according to Susan Stautberg, the co-founder of Women Corporate Directors, which promotes more female membership on boards, citing recent studies by Credit Suisse and Catalyst. Apple has a diverse customer base and should have a board and executive team representative of that, Stautberg said. Board Issues "You need to have people on your board knowledgeable in the different markets of where you're competing and in the areas where you want to go." Stautberg said. Board diversity isn't the only area where Apple has faced criticism from shareholders. The company has also been scolded by groups including shareholder-voting service Institutional Shareholder Services Inc. for what it calls excessive executive compensation. Shareholders last year approved a proposal to more closely tie executive pay to stock performance. Apple, whose stock price trailed the Standard & Poor's 500 Index last year, reduced the amount handed out to its top executives in 2013. Apple rose 5.4 percent while the index climbed 30 percent. Page 8 of 10 Top-paid executives received more than $68 million in 2012, compared with less than $4.3 million in 2013. Cook, who received a package valued at $378 million in 2011, also agreed last year to link some of his compensation to Apple's stock performance. Conciliatory Approach Under Cook, Apple has shown a more pacifying and agreeable approach when dealing with investors. In addition to submitting to demands about pay and diversity, the company also instituted in 2013 one of the largest dividend and buyback programs among U.S. companies after years of shareholder requests. Cook has also been outspoken about improving equality since succeeding Steve Jobs as CEO in 2011. Case Questions 1. Using the facts of the case, identify four reasons why it would be advantageous to have more women and diverse members on Apple's board of directors. (10 marks) 2. Tim Cook was appointed Chief Executive Officer (CEO) to replace Steve Jobs at Apple Inc. 1 Cook was now to be promoted as both Chairman of the Board and CEO (i. e. CEO duality), outline three benefits and two disadvantages of such a move (10 marks) Briefly discuss the difficulties in establishing performance-based compensation plans for high-level executives such as Tim Cook. (10 marks) Apple Inc., facing behind-the-scenes pressure from some shareholders to add more female directors and executives, has taken a step to address the criticism and diversify its board. The move follows objections from shareholders Trillium Asset Management Ltd, and the Sustainability Group, who said they are disappointed that the iPhone maker has only one woman on its eight-member board, and one incoming female member of the executive team that reports to Chief Executive Officer, Tim Cook. The shareholders met with Apple representatives several times in the past few months and said they would bring the issue to a vote at a February 28 shareholder meeting. They said however, they backed off after Apple added language to the charter that promises to consider women and minorities as board candidates. "There is a general problem with diversity at the highest echelon of Apple," said Jonas Kron, director of shareholder advocacy at Boston-based Trillium, which manages $1.3 billion. "It's all white men". The new language shows how scrutiny of Apple's diversity practices has now taken on greater significance after other Silicon Valley companies faced questions over their male-dominated leadership ranks. Social-networking companies Facebook Inc. and Twitter Inc. were criticized leading up to their initial public offerings for not having any female directors. Diversity Issues Only 17 percent of board seats on Fortune 500 companies and 15 percent of executive officer positions were held by women in 2013, according to a report by Catalyst Inc., a non-profit researcher. "There is a lot of room for improvement," said Larisa Ruoff, who runs shareholder advocacy and corporate engagement for the Sustainability Group. "We live in an increasingly complex global marketplace, and the companies that can hire, attract, and retain women and people of color are better equipped to capitalize on global opportunities and avoid missteps that may not be apparent to a more homogeneous group." Board Makeup Andrea Jung, the former CEO of Avon Products Inc., is the lone woman and person of color on Apple's board, which otherwise includes seven white men all over the age of 50. Angela Ahrendts, the former CEO of Burberry Group Plc, will be the only woman on the company's executive team when she takes over Apple's retail operation in the first half of this year. Adding more gender, generational and cultural diversity to a board improves financial performance and corporate governance, according to Susan Stautberg, the co-founder of Women Corporate Directors, which promotes more female membership on boards, citing recent studies by Credit Suisse and Catalyst. Apple has a diverse customer base and should have a board and executive team representative of that, Stautberg said. Board Issues "You need to have people on your board knowledgeable in the different markets of where you're competing and in the areas where you want to go." Stautberg said. Board diversity isn't the only area where Apple has faced criticism from shareholders. The company has also been scolded by groups including shareholder-voting service Institutional Shareholder Services Inc. for what it calls excessive executive compensation. Shareholders last year approved a proposal to more closely tie executive pay to stock performance. Apple, whose stock price trailed the Standard & Poor's 500 Index last year, reduced the amount handed out to its top executives in 2013. Apple rose 5.4 percent while the index climbed 30 percent. Page 8 of 10 Top-paid executives received more than $68 million in 2012, compared with less than $4.3 million in 2013. Cook, who received a package valued at $378 million in 2011, also agreed last year to link some of his compensation to Apple's stock performance. Conciliatory Approach Under Cook, Apple has shown a more pacifying and agreeable approach when dealing with investors. In addition to submitting to demands about pay and diversity, the company also instituted in 2013 one of the largest dividend and buyback programs among U.S. companies after years of shareholder requests. Cook has also been outspoken about improving equality since succeeding Steve Jobs as CEO in 2011. Case Questions 1. Using the facts of the case, identify four reasons why it would be advantageous to have more women and diverse members on Apple's board of directors. (10 marks) 2. Tim Cook was appointed Chief Executive Officer (CEO) to replace Steve Jobs at Apple Inc. 1 Cook was now to be promoted as both Chairman of the Board and CEO (i. e. CEO duality), outline three benefits and two disadvantages of such a move (10 marks) Briefly discuss the difficulties in establishing performance-based compensation plans for high-level executives such as Tim Cook. (10 marks)

Answer rating: 100% (QA)

Answer 1 There would be a great deal of benefit to Apples board of directors if there were a greater number of women and members from varied backgrounds To begin Apples customer base is more accuratel... View the full answer