Apple will face increasing pressure from activist investors, as SEC more sympathetic

The Financial Times argues that Apple will face increasing pressure from activist investors, as the Securities & Exchange Commission (SEC) allows more shareholder resolutions to proceed to a vote.

It notes that while (former) big investors like Carl Icahn once held the biggest influence on Apple, these days it is more small investors with a popular cause …

The FT notes that Apple eventually met Icahn’s demands for stock buybacks.

In 2013, Carl Icahn took on the biggest company in the world. The activist built a 1 per cent stake in Apple, slammed its “ridiculous” cash hoarding, demanded a $15bn share buyback and threatened to force a shareholder vote […]

Although Icahn’s buyback prescription was not followed to the letter, Apple has hugely increased shareholder payouts. The company paid its first ever dividend in 2013. It now returns more than $100bn a year to shareholders.

Small activist investors now hold more power

Although Icahn subsequently sold his AAPL holding, the FT’s business lead Tom Braithwaite says that it’s now more about the content of shareholder proposals than the size of the holding.

Strangely enough, Apple looks more vulnerable to activist pressure than it has since Icahn. A new breed of activists is buying tiny stakes and using them to push shareholder resolutions. A newly sympathetic Securities and Exchange Commission is facilitating this, allowing resolutions to go forward when previously, officials might have helped the company strike them from the ballot.

On Thursday, Apple published proposals that will be put a to a vote in March. They include six shareholder motions that range from banning gagging clauses for employees who suffer discrimination to increasing transparency on how the company removes apps from its App Store.

9to5Mac’s Take

We’ve long argued that Apple needs to apply the same long-term thinking to reputational issues it does to its product development strategy. The company needs to get ahead of changes in public and political perception, not be lagging behind.

For a company whose business is “skating to where the puck will be,” it’s astonishing to me how badly the company does this when it comes to reputational issues.

For each of the big issues that have brought the company bad publicity this year, Apple has taken its usual “We know best” approach. When it has made changes, it has been dragged kicking and screaming to its revised position, rather than taking a lead.

Activist investors can successfully apply pressure to Apple’s board, and occasionally even force change, but it’s a way, way better look if the company takes the initiative.

This year’s annual shareholder meeting will be virtual, taking place on March 4.

Photo: Mika Baumeister/Unsplash