1. PROPOSAL NO. 5
Shareholder Proposal Entitled “Amend the Company’s Corporate Governance Guidelines to Adopt and
Disclose a Written CEO Succession Planning Policy”
The Company has been advised that Central Laborers’ Pension Fund, P.O. Box 1267, Jacksonville, Illinois 62651, a
beneficial owner of 11,484 shares of the Company’s common stock, intends to submit the proposal set forth below
at the Annual Meeting.
RESOLVED: That the shareholders of Apple, Inc. [sic] (“Company”) hereby request that the Board of
Directors initiate the appropriate process to amend the Company’s Corporate Governance Guidelines
(“Guidelines”) to adopt and disclose a written and detailed succession planning policy, including the following
specific features:
• The Board of Directors will review the plan annually;
• The Board will develop criteria for the CEO position which will reflect the Company’s business
strategy and will use a formal assessment process to evaluate candidates;
• The Board will identify and develop internal candidates;
• The Board will begin non-emergency CEO succession planning at least 3 years before an expected
transition and will maintain an emergency succession plan that is reviewed annually;
• The Board will annually produce a report on its succession plan to shareholders.
SUPPORTING STATEMENT:
CEO succession is one of the primary responsibilities of the board of directors. A recent study published by the
NACD quoted a director of a large technology firm: “A board’s biggest responsibility is succession planning.
It’s the one area where the board is completely accountable, and the choice has significant consequences, good
and bad, for the corporation’s future.” (The Role of the Board in CEO Succession: A Best Practices Study,
2006). The study also cited research by Challenger, Gray & Christmas that “CEO departures doubled in 2005,
with 1228 departures recorded from the beginning of 2005 through November, up 102 percent from the same
period in 2004.”
In its 2007 study What Makes the Most Admired Companies Great: Board Governance and Effective Human
Capital Management, Hay Group found that 85% of the Most Admired Company boards have a well defined
CEO succession plan to prepare for replacement of the CEO on a long-term basis and that 91% have a well
defined plan to cover the emergency loss of the CEO that is discussed at least annually by the board.
The NACD report identified several best practices and innovations in CEO succession planning. The report
found that boards of companies with successful CEO transitions are more likely to have well-developed
succession plans that are put in place well before a transition, are focused on developing internal candidates
and include clear candidate criteria and a formal assessment process. Our proposal is intended to have the
board adopt a written policy containing several specific best practices in order to ensure a smooth transition in
the event of the CEO’s departure. We urge shareholders to voteFOR our proposal.
The Company’s Statement in Opposition to Proposal No. 5
The Board of Directors recommends a vote AGAINST Proposal No. 5.
The Company recognizes that a highly talented and experienced management team, not just the CEO, is critical to
Apple’s success. Accordingly, the Board already implements many of the proposed actions and
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maintains a comprehensive succession plan throughout the organization. While the Board strongly supports the
concept of succession planning, it recommends a vote against Proposal No. 5 for the following reasons.
As noted, the Company already fulfills several of the requests proposed. The Company’s Corporate Governance
Guidelines, available publicly on the Company’s website, require the Board and CEO to conduct an annual review
2. of succession planning for senior management, including the CEO. As part of this annual review, the Board has a
formal evaluation process in which it identifies and recommends development of internal candidates for succession
based on criteria that reflect Apple’s business strategy.
Furthermore, adopting Proposal No. 5 would give the Company’s competitors an unfair advantage. Proposal No. 5
would publicize the Company’s confidential objectives and plans. Giving competitors access to this information is
not in the best interest of the Company or its shareholders.
Proposal No. 5 would also undermine the Company’s efforts to recruit and retain executives. The Board believes
that the Company’s success depends on attracting and retaining a superior executive team, including the CEO.
Proposal No. 5 requires a report identifying the candidates being considered for CEO, as well as the criteria used to
evaluate each candidate. By publicly naming these potential successors, Proposal No. 5 invites competitors to recruit
high-value executives away from Apple. Furthermore, executives who are not identified as potential successors may
choose to voluntarily leave the Company.
Proposal No. 5 attempts to micro-manage and constrain the actions of the Board. In practice, the Board and the
management of the Company are best equipped to carry out succession planning, as well as to handle day-to-day
hiring, promotion and termination decisions. Such decisions take into consideration numerous criteria that are
continually adapted to meet the evolving demands of the Company and should not be constrained by arbitrary rules
such as the three-year “non-emergency CEO succession planning” in Proposal No. 5. The Company takes
succession planning seriously, and the Board has adopted a comprehensive process to ensure continuity and
maintain the superior quality of its management team. This process also allows flexibility to adjust to unanticipated
changes in the market. As such, the Company is already substantially fulfilling the request in Proposal No. 5, and
the Board recommends a vote against Proposal No. 5.
Vote Required
Approval of Proposal No. 5 requires the affirmative vote of (i) a majority of the shares present or represented by
proxy and voting at the Annual Meeting and (ii) a majority of the shares required to constitute the quorum.
Recommendation of the Board
The Board recommends a vote AGAINST Proposal No. 5.