Tim CookSource: Apple

What you need to know

  • Apple's annual shareholder meeting will take place on February 26 this year.
  • An SEC filing has revealed that one of the shareholder's proposals concerns Apple's policy regarding freedom of expression.
  • The information requested is designed to "close the gaps" when it comes to transparency over freedom of expression policies.

An Apple shareholder proposal to be voted on at its annual shareholder meeting in February 26 is requesting that its Board of Directors report annually on the company's policies on freedom of expression and access to information.

The proposal was revealed in a filing to the SEC. The report contains a lot of information about Apple's corporate operation, including executive compensation, corporate governance, how much Apple spends on air travel and more. It also contains details about Apple's annual meeting of shareholders, which is due to take place on February 26, 2020, at the Steve Jobs Theater at Apple Park.

At the meeting, Apple shareholders will vote on several items of business including the election of directors, ratifying the appointment of an accounting firm and executive compensation. However, the final item to be voted on is titled 'Policies on Freedom of Expression.'

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The shareholder proposal introduction states:

Resolved: Shareholders of Apple Inc. ("Apple" or the "Company") request that the Board of Directors report annually to shareholders, at reasonable expense and excluding confidential and proprietary information, regarding the Company's policies on freedom of expression and access to information, including whether it has publicly committed to respect freedom of expression as a human right; the oversight mechanisms for formulating and administering policies on freedom of expression and access to information; and a description of the actions Apple has taken in the past year in response to government or other third-party demands that were reasonably likely to limit free expression or access to information.

A supporting statement notes that Apple "sells products and services in countries whose governments limit free expression and punish dissent". Specifically, it names China, which accounted for 20% of Apple's net sales in 2018.

The government of China, a market accounting for 20% of Apple's net sales in 2018, "suppresses politically sensitive speech" and "wrong-oriented" online content, according to Human Rights Watch, and blocks sites using a filtering system nicknamed the "Great Firewall."

The proposal notes that Apple has cooperated with requests made by the government of China "to restrict freedom of expression and information." This includes but is not limited to removing all VPN apps from the Chinese App Store in 2017.

VPNs have been used by activists and others to circumvent the Great Firewall, leading to a ban on their private use. The U.N.'s special rapporteur on opinion and expression registered concern over Apple's move. Such controversies are not likely to be limited to China: Russia and Turkey have also enacted curbs on VPNs, and Russian President Vladimir Putin recently signed legislation giving the government broad powers to punish speech.

The proposal states that Apple removed 635 apps in 2018 for "legal violations" in 2018, 517 of those were in China. The vast majority of those relate to illegal gambling or pornography, but others remain unaccounted for. The proposal cites the removal of The New York Times app from the Chinese App Store in 2017 at the behest of the Chinese government, even footnoting a link to NYT's story on the subject. The proposal finally cites Apple's ranking in the 2019 Corporate Accountability Index by Ranking Digital Rights ("RDR").

Although RDR gave Apple good marks for privacy, it criticized the Company's governance of freedom of expression issues, including its failure to commit publicly to respect freedom of expression as a human right, and its lack of transparency on policies and practices related to freedom of expression.

The supporting statement concludes by saying that the proposal will "close the gaps" regarding Apple's approach to freedom of expression and access to information. It wouldn't require disclosure of actions not related to that, for example, the removal of apps that solicit illegal gambling.

Interestingly, Apple's Board of Directors is recommending a vote against this proposal. They state that free expression is essential to Apple and its success, but notes that it has an obligation to comply with local laws in the countries in which it operates:

In these instances, we prioritize engagement, advocating for the outcome we believe is in the best interests of our users. And, while we may disagree with certain decisions at times, we do not believe it would be in the best interests of our users to simply abandon markets, which would leave consumers with fewer choices and fewer privacy protections. We believe engaging and participating in markets enables us to advocate for policies and practices that are consistent with Apple's values.

The statement goes on to lay out some of the measures Apple already has in place, such as its Business Conduct Policy and its Supplier Responsibility team which help it to "strive to ensure that people throughout our supply chain have a safe and healthy workplace where they are treated with dignity and respect and that the planet we all share is protected." The board also says that it works with companies and NGOs to promote and protect human rights. In conclusion, it states:

Apple's Board plays a vital and important role in this work. Our Audit Committee, consisting entirely of independent directors, assists the Board in monitoring our significant business risks, including operational and reputational exposures that may relate to human rights and compliance with governmental laws, regulations, and orders. The additional report requested by this proposal is unnecessary based on the extensive information that is already publicly provided to our shareholders and users.

The proposal requires an affirmative vote of a majority of the shares present and represented by proxy at the meeting. Given the board's recommendation against the proposal, it may well be that the measure is voted down by shareholders. However, the fact that it's even being voted on at all shows that concerns raised in recent months about Apple's approach to privacy has not escaped the attention of its shareholders.

The proposal cites as mentioned The New York Times article regarding the removal of its app from the China App Store, as well as an Ars Technica piece on Vladimir Putin's internet-censorship bills and an article about a letter sent to Apple over China's VPN demands. It seems that the public attention Apple has drawn to itself over certain incidents has prompted shareholders to request an annual report from Apple's Board of Directors, no doubt in part to hold Apple accountable, but also in the hope that "closing the gaps" will ease the minds of shareholders mindful of negative press Apple has received on the subject.

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