With bylaw tweaks, Apple grants activist one of three wishes

Apple Inc’s board relaxed some rules for director nominations by outside investors but stopped short of broader changes sought by an activist shareholder.

The new bylaws disclosed in a securities filing late on Thursday dealt with the mechanics of “proxy access,” the sometimes controversial process allowing outside investors to nominate their own candidates to a company’s board.

Just how much influence to give such investors has been a hot topic with the rise of activist shareholders who some executives fear may not have long-term corporate interests at heart. At Apple, this debate played out several years ago when billionaire activist investor Carl Icahn successfully urged an increase in share buybacks.

Apple, the world’s highest-valued publicly traded company, moved last year to allow a group of up to 20 shareholders owning at least 3 percent of its stock to include their own director candidates, constituting up to 20 percent of the board, in its proxy materials.

Thursday’s filing said shareholders also could re-nominate a director candidate regardless of the level of support he or she had won in earlier elections. Previously, shareholders were prohibited from re-nominating candidates who had gotten less than 25 percent at either of the company’s last two annual meetings.

Apple also extended a procedural deadline for nominating shareholders and director candidates, and it limited its board’s direction to unilaterally interpret certain provisions, according to the filing.

An Apple representative said the company would not comment beyond the filing.

Independent shareholder James McRitchie, who has pressed Apple to grant more proxy access rights, said the changes were welcome, especially on the re-nomination question. But he said Apple failed to address two of his other, larger concerns.

McRitchie said in a telephone interview that he would prefer there be no limit to the number of investors needed to reach the 3 percent threshold for nominating a director and that the board should change its terms to allow investors to nominate up to two directors to its eight-member board, up from one currently.

Both ideas, along with a request to do away with the limits on re-nominations, are in a shareholder proposal McRitchie submitted to the company for a vote at its next annual meeting, expected early next year.

The U.S. Securities and Exchange Commission in October rejected a request by Apple to exclude the proposal. An agency lawyer said officials were “unable to conclude” Apple’s current policies compare favorably with the activists’ submission, as the company had argued, according to correspondence on the SEC’s website.

McRitchie, who owns about 600 shares of Apple, said he might be amenable to a compromise, but Apple has not spoken to him about one.

“I’m a bug that’s too small to register on their thick hide,” he said.

Source: Reuters