Apple: Our bad; Investors passed, will get ‘say on pay’

Apple shareholders will be getting a “say on pay” after all.

apple-logoBeginning next year, Apple will allow investors to have an annual advisory vote on its executive pay packages, the company said Monday in a statement. After repeatedly saying that shareholders had lost a vote on the matter at its annual meeting in February, Apple acknowledged in the statement that it had miscounted shareholder votes, mistakenly counting abstentions as no votes.

In a post on Friday, I noted that Apple seemed to have changed the way it counts shareholder votes over the last year. More shareholder votes were cast in favor of “say on pay” this year than last, and the gap between yes and no votes on the matter had widened. Despite that, Apple said last year that the matter had passed, while saying this year that it failed.

The company initially reported that the “say on pay” proposal failed in February at its annual meeting. Unlike other public companies, Apple does not release the preliminary vote totals on which it makes a call about the outcome of shareholder votes. So investors had to wait until last week — two months after the vote — to find out the real totals when the company reported them inside its latest quarterly financial report. That’s when the discrepancy finally came to light.

In fact, Apple miscalculated the the percentage of shareholder votes that voted against each of the investor-backed proposals. The only one that really mattered, though, was “say on pay,” because the other proposals were all soundly defeated, even if you excluded the votes that abstained.

Apple chalked up the mistake to “human error,” saying that it had launched an internal investigation into the matter last week after becoming aware of the vote problem shortly after it released its quarterly report. The company did not say who was responsible for the error, whether it was someone at Apple itself or someone at the auditor that counted votes at Apple’s meeting.

Regardless, investors will finally be able to formally tell Apple directors how they feel about the company’s pay practices. Shareholder representing a significant portion of Apple shares have been voting in favor of that right at the last three annual meetings. The issue became an especially hot-button topic at the company after 2006, when it acknowledged backdating thousands of stock options.

Before today, Apple had declined to comment on the votes. But in its proxy statement, Apple urged investors to vote against “say on pay” this year, arguing in part that because Congress is strongly considering mandating “say on pay” that the company should wait to see what Congress decides before acting on its own.

On Monday, the company said it would allow shareholders an advisory vote regardless of what Congress decides.

“The Compensation Committee of Apple’s Board of Directors has been closely following the say on pay issue,” the company said in a statement. Even if Congress doesn’t act on the issue, “Apple is committed to implementing an advisory Say on Pay vote next year.”

 

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