Shareholders representing $9.4 billion in assets submitted a proposal calling on Apple to link CEO Tim Cook’s paycheck to race and gender equity metrics and other sustainability goals
A new letter from Apple Inc. seeks to block a request by a group of shareholders for the company to study its diversity metrics and to tie CEO compensation to racial and gender diversity achievements. The move comes as Apple and other tech companies have come under increasing scrutiny for failing to improve racial and gender diversity.
The shareholder proposal asks Apple to consider “integrating sustainability metrics, including metrics regarding diversity among senior executives, into the performance measures of the CEO under the Company’s compensation incentive plans.” The proposal argues that, among other problems, the lack of diversity at Apple “creates challenges for talent acquisition and retention, product development, and customer service.”
Apple’s 2016 diversity statistics show that the company’s management is 67% White, 3% Black, 7% Hispanic, and 21% Asian. As of 2016, only five of Apple’s top 107 executives were people of color. An Open MIC report this year cited data showing that black people, Latinos, and Native Americans are underrepresented in the tech industry by 16-to-18 percentage points.
Apple’s October 9 letter asks the U.S. Securities and Exchange Commission (SEC) for permission to ignore the shareholder proposal, which Apple claims is not substantially related to the company’s long-term sustainability. The SEC staff will consider Apple’s filing and decide whether Apple shareholders will have a chance to vote on diversity and inclusion at the Company’s annual meeting in early 2018.
The proposal was filed last month by Zevin Asset Management, a Boston-based sustainable investment firm, along with Friends Fiduciary Corporation, Nathan Cummings Foundation, the Employees’ Retirement System of Rhode Island, the SEIU General Fund, and London-based music executive Tony Maldonado. The shareholders have been assisted by Open MIC, a non-profit organization that works to foster shareholder engagement with media and technology companies.
“The tech sector faces a diversity and inclusion crisis,” said Pat Miguel Tomaino, Associate Director of Socially Responsible Investing at Zevin Asset Management. “Investors need to know that Apple has what it takes to recruit and retain talented and diverse workers. C-suite accountability is a critical step.” Zevin recently filed shareholder proposals at Amazon and Alphabet (parent of Google) which are similar to the proposal at Apple.
The Apple proposal cites 2017 McKinsey research showing that firms in the top quartiles for gender and racial/ethnic diversity are more likely to have above average financial returns. It also notes a 2016 study by Intel and Dalberg which estimates the technology sector could generate $300–$370 billion in additional annual revenue if tech companies reflected the racial diversity of the talent pool.
“There is a strong business case for diversity, inclusive of gender and race. If Apple is going to be successful in their work to ‘break down historical barriers in tech’ the company first needs a substantive plan to understand its own metrics,” said Seth Magaziner, General Treasurer of The State of Rhode Island.
“Companies with diverse leadership experience have less business risk,” said Tony Maldonado. “This is a business issue. If Apple wants to reduce risk for shareholders, it needs to put its money where its mouth is and tie diversity goals to its CEO pay package.”
Jeffery W. Perkins, Executive Director of Friends Fiduciary Corporation, said: “The tech sector is driving economic growth and creating massive wealth. But systemic inequality at companies like Apple is threatening to further separate people of color and women from opportunity.”
Laura Campos, Director, Corporate & Political Accountability for the Nathan Cummings Foundation, noted that Apple peers such as Microsoft, Intel and IBM have already set diversity goals and begun tying a portion of executive pay to those goals. “The IT industry has had a very public struggle with diversity and inclusion. Tim Cook, in particular, has led Apple to publicly state their commitment and to support critical social issues like immigration policy. Implementing the proposal rather than attempting to exclude it would allow Apple to continue to lead their industry by creating real accountability for their stated values.”
“Research shows that diversity yields positive performance and returns in capital markets,” said Renaye Manley, Deputy Director at the SEIU General Fund. “Tech companies - and Apple in particular - need to better reflect the American population and not be content with leadership that is still predominantly white and male."
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For more information contact:
Michael Khoo, UpShift Strategies, michael@upshiftstrategies.com, 202-669-7911
Pat Miguel Tomaino, Associate Director of Socially Responsible Investing, Zevin Asset Management, pat@zevin.com, 617-742-6666
Michael Connor, Executive Director, Open MIC, mconnor@openmic.org, 212-875-9381
Artealia Gilliard, Director of Communications, Nathan Cummings Foundation, artealia.gilliard@nathancummings.org, 212-786-7300
Evan England, Director of Communications, Employees’ Retirement System of Rhode Island, evan.england@treasury.ri.gov, 401-222-2240