Exploring Corporate Governance Around the World

By Allison Garrett, Senior Vice President for Academic Affairs at Oklahoma Christian University

Tuesday, January 11, 2011

Succession Planning at Apple

In the last few years, I have blogged about succession planning, sharing my thoughts on best practices. I have also blogged about whether companies should have an obligation to disclose health issues faced by top executives. Now, Apple faces an interesting shareholder proposal on just this issue.

The proposal, filed by a union pension fund, will be voted on by Apple's shareholders in February. The proposal calls for the Board to "adopt and dislose a written and detailed succession planning policy." As a part of the policy, the Board will review the plan on an annual basis, develop criteria for a CEO and assess candidates, plan for transitions at least 3 years out, and report annually to shareholders.

The Apple Board has recommended that shareholders vote against the proposal arguing that the company already has a detailed succession planning process and that extensive disclosures could make its most talented executives more likely targets of headhunters. I find that the first part of the Apple response makes some sense. Like most large companies, Apple undoubtedly has detailed succession planning practices in place.

As to the second argument, I am skeptical that reporting to the shareholders on those practices in detail would significantly enhance the chances of a competitor stealing a talented executive. There are two reasons why I don't give much credence to this argument. First, companies are already required to attach to their 10-Ks the employment contracts for their top officers. Hint: you may have to search back several years to find the contract for the person you are seeking. Second, the top officers tend to be fairly high profile anyway. A competitor likely already knows from industry sources and the media who the most talented individuals are.

So Apple, if I were you, I would render the proposal moot by agreeing to report on what I already do.

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