San Francisco: Directors at Apple Inc., after taking a back-seat role for years to chief executive Steve Jobs, were forced to respond to investors on 25 February as they pushed for an update on Jobs’ health.
Apple’s co-lead directors, Arthur Levinson and Bill Campbell, each answered questions at the company’s annual meeting on how the board has handled disclosures about Jobs’ health, succession planning and executive pay at the firm.
In past years, Jobs has dominated the meeting, with board members sitting quietly in the first row of the audience.
“The dynamism of him controlling the meeting has changed,” Scott Adams, a representative of the American Federation of State, County and Municipal Employees, said after the meeting. His organization owns 18,218 Apple shares. In the past, “Jobs would not allow questions to go to directors”.
Standing up to address a packed room, Levinson, CEO of Genentech Inc., said that “nothing has changed” since Apple’s disclosure on 14 January that Jobs was taking a five-month medical leave.
“He certainly remains the CEO—he’s responsible and deeply involved in all strategic matters,” said Levinson, who has served on Apple’s board since 2000.
Corporate governance experts have faulted Apple’s board, which includes former US vice-president Al Gore and Google Inc. CEO Eric Schmidt, for not talking about Jobs’ health sooner and in more detail after concerns about his weight loss last year caused movements in the stock price.
Jobs, a cancer survivor, missed the annual meeting for the first time in at least a decade.
While giving shareholders updates isn’t a rule, Apple’s board will probably be compelled to talk more about Jobs’ health if anything changes significantly, said Jahan Raissi, a partner at Shartsis Friese Llp. in San Francisco. He was a former senior counsel in the enforcement division of the Securities and Exchange Commission (SEC).
Apple fell $1.97 (Rs100), or 2.2%, to $89.19 at 4pm New York time in Nasdaq stock market trading on Thursday. The shares have gained 4.5% this year.
The gathering—held in the same auditorium at Apple’s Cupertino, California, headquarters where Jobs typically introduces new products—was the biggest public assembly of directors at an annual meeting in the past three years.
Levinson and Intuit Inc. chairman Campbell, seated in the front row, were flanked by four other independent directors: Gore, J Crew Group Inc. CEO Millard “Mickey” Drexler, Avon Inc. CEO Andrea Jung and former International Business Machines Corp. finance chief Jerome York. The only board members absent were Jobs and Schmidt.
On 5 January, Jobs had said treatment for his weight loss was “relatively simple”. Nine days later, he announced he would take leave after learning his health issues were “more complex” than he originally thought.
SEC started an investigation into the disclosures to determine whether investors were misled, a person familiar with the matter said last month. The review doesn’t mean investigators have seen evidence of wrongdoing. Apple general counsel Daniel Cooperman declined to comment on the SEC investigation.
Jobs, who co-founded Apple in 1976 and was ousted in a management coup in 1985, returned to lead the company in 1997. One of the first things he did was to replace all but two of the board members. His picks included Campbell, a former Apple executive, and York, an adviser to Tracinda Corp. chief Kirk Kerkorian.
“It’s a very secretive culture, a very closed culture,” said Conrad Mackerron, director of corporate social responsibility for As You Sow, an environmental advocacy group in San Francisco.
The group, which met Jobs two years ago to talk about Apple’s environmental policies, submitted a shareholder proposal asking that the company provide more details on its effort to cut carbon emissions.
Only shareholders were allowed into the meeting hall and able to ask questions.
Campbell, 68, used his time at the microphone to talk about the board’s decision to vote against a “say-on-pay” proposal. He said the board wanted to retain the flexibility to reward executives as “we see fit”.
“You can sense there’s more disclosure”, in that board members were forced to answer questions, said Gene Munster, an analyst with Piper Jaffray and Co. in Minneapolis, who has recommended investors buy Apple’s shares since June 2004. “It’s a good thing that Apple is more transparent.”
Investors still want more information, said Andy Hargreaves, an analyst at Pacific Crest Securities in Portland, Oregon.
“If I was a shareholder, I would have been upset if I heard them say, ‘He was fine, it’s a hormone imbalance’ and then nine days later, hear him say ‘I’m taking leave’,” said Hargreaves, who rates Apple shares “outperform”.