Apple Inc's move to eliminate from its charter the ability to issue
preferred shares without first getting shareholder approval has received
the support of the largest public pension fund in the United States,
and an influential proxy firm.
Hedge Fund manager David Einhorn's
Greenlight Capital is suing Apple to get it to deploy its $137.1 billion
cash pile more effectively by issuing preferred stock, which he says is
superior to dividends or share buybacks.
His lawsuit, filed in
U.S. District Court in Manhattan on Thursday, targets the proposal by
Apple to remove from its charter "blank check" preferred stock.
particular proposal is "bundled" with two other unrelated proposals,
but will be collectively decided in a single vote, which Einhorn
The California Public Employees Retirement System,
the owner of 2.7 million Apple shares, and proxy voting firm ISS Proxy
Advisory Services, recommended on Friday that investors vote for Apple's
proposal. Calpers had indicated its support for the proposal in a
filing earlier this week, but reiterated its backing after Einhorn filed
All shareholders should have a vote," Anne Simpson,
Calpers Senior Portfolio Manager and Director for Corporate Governance
said on CNBC. "We don't want the board cutting a deal on the side with a
hedge fund out of fear of a lawsuit that will cancel the annual
"This is a big issue that needs to be thought through
carefully, and we want the board to come to all shareholders and give a
chance to have their voice heard," she added.
Apple is asking
shareholders at its annual meeting on February 27 to vote on the
proposal. ISS said its policy supported the elimination of "blank check"
preferred shares due to their potential to be misused as a takeover
defense because they can be issued at the company's discretion.
should the board decide at some future date that an issuance such as
Greenlight has proposed makes sense, and can demonstrate the benefit to
shareholders, obtaining the requisite shareholder support to reinstate
the provision is not likely to be an insurmountable obstacle," ISS said
in a research note.
But the firm, which issues recommendations on
how shareholders should vote on proxy proposals, also believes the
"bundling" of proposals is not in the best interest of shareholders.
Einhorn wants Apple to separate the three issues that are part of Proposal 2, which includes the "blank check" proposal.
He holds 1.3 million Apple shares worth about $600 million at current values.
Capital said it was disappointed ISS did not recognize the unique
circumstances surrounding Apple, which has $137 billion in cash and
Einhorn and other investors have accused
Apple of not managing the cash and marketable securities effectively,
limiting returns to shareholders.
Greenlight also reiterated on Friday its call to Apple shareholders to vote against the proposal.
© Thomson Reuters 2013