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Management of Apple is supposed to be shareholders' proxy, acting on their behalf to guide the company to success. Yet it's often in management's interest to take risks that are different with its main responsibility. Because of this problem, it's important for Apple to follow strong corporate-governance practices to protect shareholders and keep management in line. Practices such as independent board control, separation of the chairman and chief executive officer positions, appropriate compensation packages, proper disclosure of financial information and proper communication to shareholders are important to align management and shareholders.
Directors may reward themselves with huge salaries, fees and other rewards, such as bonuses, a generous pension scheme, share options and other benefits. Institutional shareholders do not object to high remuneration for directors. However, they take the view that rewards should depend largely on the performance of the company and the benefits obtained for the shareholders. The main complaint about ‘fat cat’ directors’ remuneration is that when the company does well, the directors are rewarded well, which is fair enough, but when the company does badly, the directors continue to be paid just as well.
According to Apple’s case, the Compensation Committee will review the form and amount of director compensation annually and recommend any changes to the Board. Non-employee directors are expected to receive a substantial portion of their annual retainer in the form of equity. Employee directors are not paid additionalcompensation for their services as directors. (Page 24 of XVII)
The Compensation Committee should conduct, and review with the Board, an annual evaluation of the performance of all executive officers, including the CEO. The Compensation Committee is expected to use this review in the course of its deliberations when considering the compensation of the CEO and senior management. The...
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