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Apple under 'great pressure' to respond after investors criticize China app removals

An Apple shareholder proposal critical of Chinese App Store policies failed to gain approval on Wednesday, but experts say a relatively high show of support from investors could prompt the tech giant to respond.

In line with Apple's recommendation, shareholders voted down a proposal that sought regular reporting on the company's policies on freedom of expression and access to information, "including whether it has publicly committed to respect freedom of expression as a human right."

Proposal 6 dealt with Apple's decision to remove certain apps from the App Store at the behest of Chinese government officials. Specifically cited incidents included a mass takedown of VPN apps in 2017, the purging of at least 634 "illegal" apps in 2018 and the removal of The New York Times app in 2017. In each case, Apple acted on requests from the Chinese government, a regime known to stifle free speech.

Though it was denied, the proposal gained support from 40.6% of voting shareholders, a much higher tally than similar suggestions enjoyed in past years. In 2018, a proposal to create a human rights committee to deal with workplace and censorship issues in China failed dismally, drawing only 5.6% of votes cast.

According to experts, the spike in support suggests investors are becoming increasingly wary of the optics of Apple's seemingly obsequious relationship with China, reports Reuters.

"A total this high is a striking warning — and it must have come from big institutional investors, not just retail shareholders — that Apple's human rights policy in China has become a material risk for the company's reputation," said Stephen Davis, a senior fellow at Harvard Law School's Program on Corporate Governance. "Apple will be under great pressure to respond rather than ignore this vote."

Kern McPherson, vice president of research and engagement for proxy advisory firm Glass, Lewis & Co, said he expects Apple to "engage with its shareholders on the issue and report to shareholders about what happened in the engagements, including any potential actions it intends to take as a result." The firm supported the proposal.

For its part, Apple says it adheres to the laws and regulations of countries in which it operates.

"In these instances, we prioritize engagement, advocating for the outcome we believe is in the best interests of our users. And, while we may disagree with certain decisions at times, we do not believe it would be in the best interests of our users to simply abandon markets, which would leave consumers with fewer choices and fewer privacy protections," Apple said in its proxy statement. "We believe engaging and participating in markets enables us to advocate for policies and practices that are consistent with Apple's values."

Those policies might be ripe for change. According to the report, Apple's senior privacy director, Jane Horvath, in a February letter to open-internet advocacy group Access Now intimated that the company is discussing the issue internally.

"Apple has and always will consider freedom of expression a fundamental human right," Horvath said, adding that the company "will consider providing additional details on our commitment in the future."