Apple shuns call for succession plan
As Steve Jobs remains on sick leave, activists are demanding to know what will happen if he doesn't return
Wednesday 23 February 2011
Apple's board needs to reassure shareholders that it has a plan in place should Steve Jobs not be able to return to his duties as chief executive of the technology giant, dissident investors will argue at the company's annual meeting today.
The health of Apple's visionary chief executive – who is on an indefinite medical leave – is sure to be centre stage when shareholders gather in California, where the board is trying to squash a proposal that would force it to publish a formal succession plan. Activists from an Illinois pension fund are demanding new details on how the company has been planning to deal with a leadership change, should one become necessary, and they say they expect wide support.
"The last thing we want is for Steve Jobs to step down. His is the classic American success story, coming from nothing to run the second-largest company in the country. We would like him to be there forever, but that is not realistic," said Jennifer O'Dell, corporate governance chief for the Central Laborer's Pension Fund, who will argue for the dissident resolution today.
"We have seen lots of examples of imperial CEOs, and ultimately they have come to harm their companies and their shareholders. We are long-term shareholders, and we want to know that the company is thinking about the future."
The pension fund, which represents 500,000 workers from 12 unions, mainly in the construction industries, says Apple should adopt and publish a succession planning policy, including a promise to review an "emergency succession plan" that is reviewed annually. Ms O'Dell says she is not calling for any particular successor to be publicly named.
Apple has reacted angrily to the idea, and is urging shareholders to throw out the plan, which it calls an attempt to "micro-manage and constrain the actions of the board". It says it has a comprehensive succession plan for all the posts in the company, including the chief executive post.
Similar resolutions have been proposed at dozens of companies, in the hope of persuading companies to promote internal talent rather than spending large amounts of shareholder money to woo outsiders to the chief executive post. At Apple, the resolution has taken on much more significance, because few other companies are so closely identified in the public mind with their chief executive – and because of Mr Jobs's battles with ill-health.
On 17 January it was announced that the Apple boss was going on indefinite medical leave and that day-to-day decision-making would devolve to Tim Cook, the chief operating officer.
It is the third time that Mr Cook has had to step in for his boss. A Silicon Valley veteran, who worked at IBM and Compaq before joining Apple in 1998, Mr Cook is now well known to Wall Street analysts, and well respected for his command of the minutiae of Apple's manufacturing business and his ability to squeeze efficiencies in the production of its products. What he is not known for is the showmanship and visionary zeal that Mr Jobs has brought to Apple as it has revolutionised first the digital music market and then the mobile phone market, and now perhaps the personal computer industry with the launch of the iPad.
Mr Cook's previous stints in charge ran for two months in 2004, while Mr Jobs recuperated from pancreatic cancer surgery, and then for six months in 2009, when the chief executive underwent a liver transplant.
There has been no update on Mr Jobs' health since January, when he wrote an email to staff saying "I love Apple so much and hope to be back as soon as I can," and asked for privacy. Speculation continues to cause gyrations in the stock, as it did last week when a US tabloid printed pictures of him leaving a California cancer clinic. Those shots, and pictures of Mr Jobs seated next to President Barack Obama during a dinner with technology industry bosses last Thursday, were scrutinised for any clues as to the nature of his illness and his prognosis.
The uncertainty led Institutional Investor Services, which advises investors on corporate governance issues, to back the Illinois pension fund's proposal for a public succession policy. "Such disclosure could help to reassure investors that the board has confidence in the management team supporting the CEO, and will be prepared to promptly name a successor whenever that becomes necessary. This could help mitigate some of the volatility in the share price which has accompanied news and rumours about the health of Mr Jobs," ISS told its clients.
But it added that it was not necessarily critical of Apple's board members. The board, it said, "appears to be quite deferential to Mr Jobs's desire for privacy regarding his health, that does not necessarily mean the board has been derelict in its duty to plan for a CEO transition."
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