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Mar 08, 2022

Apple shareholders back social proposals

Measures include request for civil rights audit

Apple shareholders have voted in favor of proposals seeking a civil rights audit and a report on certain employment arrangements, both of which the company had opposed.

According to an SEC filing, 54 percent of the votes cast at Apple’s AGM last Friday were in favor of a shareholder proposal requesting that the board oversee a third-party audit ‘analyzing the adverse impact of Apple’s policies and practices on the civil rights of company stakeholders, above and beyond legal and regulatory matters, and to provide recommendations for improving the company’s civil rights impact.’

The report should take into account input from civil rights organizations, employees and customers, according to the proponents.

The proposal’s supporting statement notes the increased attention on civil rights and gender and racial equity issues as a result of the racial justice movement and the disproportionate impacts of the Covid-19 pandemic. It also notes that Apple lists diversity, inclusion and accessibility among its key values, has committed $100 mn to a new racial justice initiative following the racial justice protests in 2020 and has a longstanding gender and racial pay equity policy.

‘Yet it is unclear how Apple plans to address racial inequality in its workforce,’ the proponents write. They also argue that Apple’s products and services raise civil rights issues: ‘A civil rights audit will help Apple identify, remedy and avoid adverse impacts on its stakeholders. We urge Apple to assess its behavior through a civil rights lens to obtain a complete picture of how it contributes to social and economic inequality.’

In response, Apple writes in its proxy statement that it is ‘committed to respecting human rights, including civil rights, and to ensuring everyone is treated with dignity and respect.’

The company argues that it ‘already fulfills the objectives of the proposal in several ways, including through impact and risk assessments, active governance and board oversight, engagement with our communities and key stakeholders and regular, transparent public reporting. We believe our current framework for the implementation and oversight of our human rights commitments is more effective than the broad and unfocused audit requested by the proposal.’

For example, Apple states, its board in 2020 adopted a human rights policy that includes a commitment to impact assessments of key civil rights issues: ‘In alignment with the [UN Guiding Principles on Business and Human Rights], we identify salient human rights risks through internal risk assessments and external industry-level, third-party audits and reports, as well as through the channels we maintain with rights holders and other stakeholders, including investors, human rights and labor experts, governments and international bodies such as the United Nations.

‘We conduct human rights due diligence through a number of teams, including the privacy, corporate and compliance teams within Apple’s legal and global security organization. Our general counsel oversees implementation of our human rights policy and reports to the board and its committees on progress and any significant issues identified in the diligence process.’

The request for a civil rights audit comes after several companies last year faced votes on requests that they conduct racial equity audits. Citigroup last October agreed to have a third party conduct a racial equity audit of the bank, six months after a significant number of its shareholders – though not a majority – voted for such a step.

A second proposal, brought by Nia Impact Capital, asks that Apple’s board ‘prepare a public report assessing the potential risks to the company associated with its use of concealment clauses in the context of harassment, discrimination and other unlawful acts.’ It received the support of 50.04 percent of the votes cast last week.

In its supporting materials, Nia Impact Capital describes concealment clauses as any employment or post-employment agreement – such as arbitration, non-disclosure or non-disparagement agreements – Apple asks employees or contractors to sign that would ‘limit their ability to discuss unlawful acts in the workplace, including harassment and discrimination’.

It states: ‘Apple wisely uses concealment clauses in employment agreements to protect corporate information, such as intellectual capital and trade secrets. [But] Apple has not excluded from these clauses [its] workers’ rights to speak openly about harassment, discrimination and other unlawful acts. Given this, investors cannot be confident in their knowledge of Apple’s workplace culture.’

Apple’s board urged shareholders to vote against the proposal. It writes in the company’s proxy statement: ‘Apple is deeply committed to creating and maintaining a positive and inclusive workplace. We recognize and support the rights of our employees and contractors to speak openly about working conditions.’

The board states that Apple’s business conduct policy, available on its website, sets out the company’s expectations regarding confidentiality of unreleased products and non-public business information, and provides that ‘nothing in this policy should be interpreted as being restrictive of your right to speak freely about wages, hours or working conditions.’ It adds that ‘working conditions’ as a term is widely understood to include terms and conditions of employment and the work environment, including unlawful acts in the workplace, such as harassment and discrimination.

‘Most employees leave Apple without a separation agreement, but for situations where an agreement is appropriate, Apple has committed to incorporate substantially the following language in all US separation agreements going forward,’ the company says. ‘Nothing in this agreement prevents you from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that you have reason to believe is unlawful.’

Other proposals on social issues did not gain majority backing but did attract levels of support that governance professionals generally regard as significant. One such proposal, filed by Azzad Asset Management, requested that the board revise the company’s transparency reports ‘to provide clear explanations of the number and categories of app removals from the app store, in response to or in anticipation of government requests, that may reasonably be expected to limit freedom of expression or access to information.’

In its supporting materials, Azzad states: ‘Apple’s transparency report for the first half of 2020 disclosed that it complied with all 46 requests from the Chinese government to remove 152 apps from the App Store. The report did not explain which apps were removed or for what reason.’

Apple opposed the measure, writing in its proxy statement: ‘Apple already provides detailed information regarding government requests to remove apps from the App Store. The additional report requested by this proposal is unnecessary based on the extensive information that is already publicly provided to our users and stakeholders, our existing policies and active board oversight.’ Despite this opposition, the proposal received the support of 31.7 percent of the votes cast.

A second proposal also related to concerns over Chinese government policy. It asked the board to oversee the preparation of a report ‘on the extent to which Apple’s policies and procedures effectively protect workers in its supply chain from forced labor, including the extent to which Apple has identified suppliers and sub-suppliers that are at significant risk for forced labor violations, the number of suppliers against which Apple has taken corrective action due to such violations and the availability and use of grievance mechanisms to compensate affected workers.’

The board writes in response: ‘Our respect for human rights includes our commitment to ensuring everyone is treated with dignity and respect across our worldwide supply chain. Apple has zero tolerance for forced labor and looking for the presence of forced labor is part of every supplier assessment we conduct.’ The proposal was supported by 33.7 percent of the votes cast.

Another proposal sought a report from Apple on ‘median pay gaps across race and gender, including associated policy, reputational, competitive and operational risks, and risks related to recruiting and retaining diverse talent.’

Apple’s recommendation that shareholders vote against the measures states: ‘Apple already fulfills the report’s objectives through our comprehensive approach to pay equity and representation, robust disclosure and active board oversight and therefore the report requested by this proposal is unnecessary.’ It received the backing of 33.6 percent of the votes cast.

A request for comment from Apple was not returned immediately.

Ben Maiden

Ben Maiden is the editor-at-large of Governance Intelligence, an IR Media publication, having joined the company in December 2016. He is based in New York. Ben was previously managing editor of Compliance Reporter, covering regulatory and compliance...