07 Feb 2019 FEP Takes Bite Out of Apple’s Rotten Logic

Apple shareholders have an opportunity to bring more ideological diversity to the company’s board of directors thanks for the hard work of the National Center’s Free Enterprise Project (FEP).

Through both proxy ballots and in-person ballots at Apple’s annual investor meeting in Cupertino, California on March 1, Apple shareholders – even those who own as little as one share of Apple stock – can vote on Proposal #5, “True Diversity Board Policy.” This proposal was submitted by FEP.

But submitting that proposal wasn’t an easy task. The Federalist website has published an article about both the content of the proposal and the arduous process of getting it in front of Apple shareholders. In the article, Federalist contributor Helen Raleigh calls FEP’s success “truly a David vs. Goliath story.”

The popular and influential website notes that FEP “cleverly modeled this proposal after similar liberal diversity proposals.” FEP Director Justin Danhof explains in the article that Apple’s complaint about the term “ideological diversity” was “a desperate move to keep its groupthink in the boardroom intact, because ‘most middle-school students understand the concept of ideological diversity.’”

As noted in the article, companies facing shareholder proposals have three options:

• Adopt the proposal or a negotiated version of it.
• Allow the proposal to be voted on by shareholders.
• Fight the shareholder and allow the federal Securities and Exchange Commission (SEC) to determine if it can be excluded from a shareholder meeting agenda.

Pepsi, which received a similar FEP proposal, adopted an ideological diversity policy and the proposal was withdrawn. It go before Starbucks shareholders in Seattle, Washington on March 20 (Proposal #4) Facebook and Twitter have not responded (their meetings are later in the year). Apple, which meets earlier than most companies, fought FEP – and lost.

Describing FEP’s proposal, The Federalist noted:

Liberals have been aggressively pushing for diversity in boardrooms based on sex and race. In 2018, CtW Investment Group, a coalition that works with “pension funds sponsored by unions affiliated with Change to Win,” introduced an Amazon shareholder proposal on “board diversity.” The proposal “calls on the Amazon board of directors to implement a ‘Rooney Rule’ requiring that the initial list of candidates from which new management-supported director nominees are chosen should include (but need not be limited to) qualified women and minority candidates.”

The Rooney Rule is a policy implemented by the National Football League in 2003 that requires NFL teams to interview at least one minority candidate for any open head coaching or general manager position. At the time of implementation, there were two minority head coaches in the NFL. Since then, the number of African-American coaches in the NFL has increased. But there is no hard evidence to prove whether they were helped by the rule or would have become head coaches anyway without it.

However, lacking hard evidence hasn’t stopped liberal groups from pushing the Rooney Rule everywhere else, especially in corporate America’s boardrooms. CtW cited Microsoft and Costco, among other companies, that have implemented the Rooney Rule in their director search. CtW pushed Amazon to do the same.

As to why ideological diversity is necessary:

Danhof explained to me that, unlike the liberals, he doesn’t advocate for a quota of conservatives on corporate boards. He believes in free enterprise and has no desire to dictate how Apple implement his diversity proposal, should it pass.

While acknowledging “a diverse board is a good indicator of sound corporate governance and a well-functioning board,” Danhof says he only wants to raise awareness that “true diversity comes from the diversity of thoughts.” He sees ample evidence that “the company – and Silicon Valley generally – operate in ideological hegemony that eschews conservative people, thoughts, and values. This ideological echo chamber can result in groupthink that is the antithesis of diversity”…

Exhibit A is that, after Dick Sporting Goods banned the sale of certain types of guns in February 2018, its overall store sales went down. Danhof hopes that diverse opinions in the boardroom will help corporations make better decisions that will benefit shareholders in the long run.

Apple fought against the FEP proposal by saying, among other things that “ideological perspectives” are not commonly understood or well-defined. This is allegedly to the extent that shareholders cannot properly vote on the proposal and the company cannot properly implement what FEP wants.

While Apple could always ask Pepsi for some advice on implementation, The Federalist pointed out that the politics of the Apple board is not hard to figure out:

Yet Apple seems very dismissive of its shareholders. Since Apple only chooses prominent figures to sit on its board, these prominent figures’ political alliances are well-known to the general public. For example, does anyone doubt where Al Gore, a long-time Apple director, stands ideologically? Apple CEO Tim Cook is especially vocal on his liberal political views and he has often done so on behalf of Apple. Without a diversity of ideas in the boardroom, no one is pushing back on him.

A shareholder proposal is an uphill fight. FEP was successful in fighting Apple and its hired-gun lawyers to get Proposal #5 on the company’s proxy statement. But it faces yet another challenge in the form of liberal proxy advisor services that have a great deal of influence on how large investment firms vote the shares under their control. While supporting leftist diversity proposals, these services generally oppose the FEP.

Despite all that, The Federalist article noted:

Still, having the “ideological diversity” proposal on shareholders’ ballots is a big win for Danhof, the FEP, and conservatives in America. Liberals have been very good at taking advantage of existing laws, regulations, and systems to advance their ideology in many aspects of our society. It’s about time conservatives catch on, push back, and let our voice be heard. Danhof and the FEP just showed us how.

To read The Federalist article – “Apple Faces Shareholder Ballot to Consider Political Diversity for Board Members” – in its entirety, click here.