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AAPL Stock: 566.7 ( + 41.95 )

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Apple investors vote on options backdating

updated 06:30 pm EDT, Thu August 9, 2007

Apple investors vote

A round of votes on shareholder proposals concerning executive compensation and options backdating at Apple show increasing investor desire for regulation of the way company managers are paid, and the methods by which they are awarded option grants. Although the measures failed to carry a majority, some of the proposals -- calling for links between stock performance and executive pay, a ban on options backdating, among others -- garnered 40 percent or more of the share votes, meaning they held strong appeal among investors other than those who originally broached the proposals.

TheStreet reports that over 41 percent of shareholders voted in favor of a proposal from the Amalgamated Bank LongView Collective to explicitly ban backdating of stock option grants. "This was just shy of the 46% that voted against the measure. About 13% of shareholders abstained." Another proposal, seeking to establish a stronger link between executive compensation and the company's stock performance relative to peer stocks, won 38% support with about 1% of shareholders abstaining. Finally, a third narrowly failed proposal would have given shareholders a non-binding vote on executive pay packages at Apple's annual meeting.

"Apple's management recommended voting against all three measures on grounds that they would inhibit the company's ability to recruit and retain talented executives and engineers. The company's board includes several independent directors, which, Apple said, would keep executive compensation in line with industry norms," reported TheStreet.




by MacNN Staff

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  1. SubPop

    Joined: Dec 1969

    0

    those ignorant of history

    ..are bound to repeat it. What happens when you tie executive salaries too close to stock value?

    Global Crossing? Tyco? WorldCom?

    Those names ring any bells?

  1. bloggerblog

    Joined: Dec 1969

    0

    oh oh!

    not again!

    ya think that's why the stock took a beating?

  1. testudo

    Joined: Dec 1969

    0

    Re those ignorant...

    ..are bound to repeat it. What happens when you tie executive salaries too close to stock value?

    Yeah, so backdating is better, because even if the stock is doing crappy, you can still pick a date which it was even crappier!

    But you too simplify the problem. First, technically they don't tie salaries to stock price, they tie the bonuses to the stock price. And the bonuses are really, really, really large.

    Secondly, there's no system currently in place at any company to base compensation on the long-term health of a company (the large stock holders don't care, because they're usually the institutional investors, and they just want as much $$$ as possible, and if that means acting in a way that rises the stock price in the short term so they can cash out, without regard to the fact it makes the company shaky, they'll do it). h***, in no other job but CEO can you do a crappy job, get 'fired', but still get paid a huge amount of money and benefits from the 'golden parachute' (now there's something that should be abolished).

    Third, its like every one of these guys went to the same lecture: "You must get larger to succeed" which states that a mid-size company has no chance in h*** of making money, so to succeed you either have to buy up competitors to get larger, or look to merge or be bought out. (This is different then the other lecture: "Reorganization: The pendulum of success" which states, when things look bad, reorganize! And when they look really bad, split off companies as separate entities. And then when it gets worse, buy up the separate entities again to consolidate processes. Repeat.

    But most important, there isn't any way to manage a compensation package that will prevent the greedy from finding a way to get all they can get. If it means cooking the books to selling off the profitable areas to stealing the company blind, they'll do it because they're greedy b*******.

  1. SubPop

    Joined: Dec 1969

    0

    re those ignorant

    Yeah, so backdating is better, because even if the stock is doing crappy, you can still pick a date which it was even crappier!

    Well, yes it is better - and for the reasons you've outlined yourself. Let the dishonest CEOs game the system once, instead of repeatedly, and the company (and shareholders) will likely survive relatively unscathed.

    Just as tieing bonuses directly to stock value seems logical from a "perfect world" perspective, so does backdating seem completely illogical. However, backdating tends to be a "once at a time" event which is usually very public to investors, easy to detect, and "might" cause a small devaluation of stock. None of the examples of major bankruptcies that we've seen at the beginning of this decade have options backdating been cited as a primary cause. In *ALL* of the major bankruptcy cases, executive bonuses tied to stock value (or executive loans and guarantees, in the case of WorldCom) were primary motivators for cooking the books and lead directly to the corporate disasters that followed.

    to succeed you either have to buy up competitors to get larger, or look to merge or be bought out.

    Ahhh, the Amway mentality of the stock market - don't focus on making money through operations, just focus on selling the company. :)

    Secondly, there's no system currently in place at any company to base compensation on the long-term health of a company

    Actually, there are a large number of systems that are being adopted and improved to prevent "gaming", and none of these tie executive bonuses to ROI, ROA, Relative Stock value, or the like. Many of these are being implemented at "old economy" companies that have seen the aftermath of the great telco melt-down and are working to proactively prevent this. Lincoln Electric (welding company, not car company), for example, was one of the first to introduce a balanced-scorecard method for compensation and has seen great success from it.

    But I agree - the trend with stockholders (more alarmingly, with well-educated stockholders) is to push for late-90's style compensation packages calling for quick stock run-ups and a more "commission-based" system for paying CEOs. You've only reinforced my original argument that these people are not paying attention to past events. Either that or they are perfectly aware of past events, and hope (as you say - and I'm afraid you might be right) to be on the "cashing in early" side of the equation.

    In any case, this mindset will probably cause more major implosions in the near future. I hope Apple doesn't become one of them.

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