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The California Public Employees' Retirement System is seeking to change the policies of Apple and 57 other large companies that make up a portion of its nearly $200 billion U.S. portfolio. By lobbying for new rules requiring a majority vote for directors, CalPERS is hoping to bring about higher board member accountability to shareholders.
News of CalPERS' push for corporate governance reform was first reported in March by BusinessWeek. After Apple resisted CalPERS' initial request, the pension fund submitted an advisory shareholder resolution, The Wall Street Journal reports.
"There is systemic risk when directors are not accountable," Anne Simpson, CalPERS' head of corporate governance, told the Journal in an interview Tuesday. Apple's current policy allows its directors to keep their seats with just a single vote in uncontested elections.
As of March 2010, CalPERS owned 2.2 million shares of Apple stock. By comparison, Apple CEO and co-founder Steve Jobs owns an estimated 5 million shares.
Apple is the first company that CalPERS has targeted with a shareholder resolution in its push for changes in corporate governance. The resolution will come up for a vote at the Cupertino, Calif., company's annual meeting in February.
CalPERS has a history of using its clout as the nation's largest pension fund to lobby for corporate reform. In 2004, CalPERS' president of the board was removed from his position in response to criticism that he was participating in corporate governance activism. Also in 2004, CalPERS warned Apple that it would vote no on all three of its shareholder measures.
According to the report, 20 of the 58 companies lobbied have agreed to CalPERS' proposal.
Apple's reticence may also stem from the fact that California law forces directors to step down if a majority-vote policy is in place and they fail to win a majority. In other states, the rules aren't typically binding, with boards reserving the right to ignore losing directors' offers to resign, the report noted.