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No. of Recommendations: 101
I met with Fred Anderson (Apple's CFO) for about 80 minutes Thursday afternoon. Nancy Paxton (Head of Investor Relations) was also there. My goal was to give a presentation explaining what we were trying to accomplish as shareholders and to argue for a series of actions that would benefit the company by improving investor confidence.

I began by giving them both a 2-page outline of my presentation along with a set of quotes from members of this board. I stuck mainly to the outline and eventually covered all the main topics, but we diverged from time to time when Mr. Anderson brought up his own issues or sought to present his own point of view with regards to an argument I was making. The tone of the meeting was very positive and it was mainly a sharing of ideas between me and Mr. Anderson.

He was a very good listener, but some of the issues I brought up put him on the defensive, which made it hard to convey some of my ideas. He did a good job of conveying his point of view and I believe his intentions are good. At times, however, he expressed opinions and attitudes that were downright disturbing and I tried to do a good job of letting him know when his statements were out of line. With hindsight, there were a few ideas that I should have been able to communicate more effectively.


Some things I believe I communicated well and were understood by Mr. Anderson and Ms. Paxton:

(on the topic of our proposal)
The goal of our proposal is to ensure that the Board is providing adequate oversight of the share repurchase program.
We don't seek to interfere with management's daily operations.
Shareholders have a responsibility as part owners to make sure the company is being run properly and the proposal is an effort along those lines.
We will follow through with this proposal and other efforts to bring about positve changes and hope that the company will work with us, rather than against us.

(on the topic of reaching out to investors)
The influence of sell side analysts has greatly diminished in recent years.
Individual investors are angry, but still looking for new ways to invest responsibly.
Institutional investors are feeling pressure to invest responsibly.
Apple has a unique opportunity to take advantage of the changing climate and appeal to these groups.
Apple has a history of reaching out to customers, developers and the open source community, and the results have always been good for the company.
Reaching out and opening up to shareholders requires an even bigger leap of faith and would likely generate even larger rewards.

(on issues of corporate governance)
Certain actions by the company have aroused suspicion among shareholders with regard to governance issues.
There is a need to communicate with shareholders to alleviate these concerns.
Human errors are often the result of bias.
The current Board of Directors is subject to a common bias.
There is a need for a diversification of viewpoints on the Board of Directors.


Because Mr. Anderson responded favorably to these points, I believe there is the potential for Apple to act favorably on all these issues. Although I believe I made an important step in communicating these concepts, we shareholders need to follow up and keep pressing on these points if we hope to see any change in behavior by Apple's management. Mr. Anderson gave me a good glimpse inside the corporation as to how things work, and it is clear to me that much more prodding is needed to bring about change.

Some things I learned about the way the company operates:

The company does seek to follow good corporate governace practices and is concerned about their public image in this regard. They currently are working to adopt the governance recommendations in a report from Institutional Shareholder Services. They responded to issues regarding Drexler and Ellison by asking them to resign from the board. If we present our case well, I believe we can get the company to respond.

The Board of Directors already does closely monitor the share repurchase program. The current policy of not repurchasing shares comes straight from the board, and not from managment. Mr. Anderson believes that the company showed great restraint in its use of the repurchase program when it was repurchasing shares, in light of constant pressure from institutional investors and other constiutancies to increase buyback activity and keep up with the market.

Top managers and directors are extremely busy people. They don't have time to respond to all shareholders. When they do look at issues we present, they don't have time to explore them thoroughly. To get their attention we need to be very clear and direct.


High power people have a great deal of self-confidence and it is difficult to get them to admit they've made mistakes or to consider a better way of doing things. No matter how great their accomplishments have been, they are still subject to the same basic flaws in human nature that lead us into folley. Here are some of the unfortunate points of view expressed by Mr. Anderson during the meeting.



At one point Mr. Anderson expressed the disturbing view that shareholders were only upset now because the stock market had fallen, and that shareholders need to blame themselves for not taking responsibility for their investments.

To address this I pointed to real issues underlying shareholder concerns.


At another point he expressed a concern that we might be trying to meddle and interfere with managment's ability to run the company effectively.

I pointed back to his statement blaiming shareholders for not taking responsibility for their investments and pointed out that or goal was to be responsible and supportive investors.


At another point he made a comment to the effect that if shareholders didn't like the actions of the Board of Directors shareholders were welcome to elect their own slate of directors.

I hope I was effective in communicating that our goal is to work cooperatively with management and the board for the benefit of all stakeholders in the company, and that we do not seek to create conflict or bring harm to anyone involved.



That's a summary of what went on at the meeting. By no means does it end here. I hope this is only just the beginning.


Rodg.
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No. of Recommendations: 16

I met with Fred Anderson (Apple's CFO) for about 80 minutes Thursday afternoon. Nancy Paxton (Head of Investor Relations) was also there. My goal was to give a presentation explaining what we were trying to accomplish as shareholders and to argue for a series of actions that would benefit the company by improving investor confidence.


80 Minutes with the CFO??? That is a *huge* amount of time with a person with such authority with a large corporation.

They are really really worried that your proposal will capture a lot of attention.

They may be preparing to run a publicity campaign agains the proxy vote on the issue. How would we publicize our view?

Through the internet, that's how! There are *a lot* of stock discussion boards. Each member of this board is certainly part of a discussion group elsewhere in cyberspace. Some of these are stock discussion groups, some not. But, even if not a stock discussion group, they will have stock owners amongst them, and they will know people on other stock discussion groups (i.e. Yahoo).

So, as long as everyone here promises to spread the word on this when the proxy is mailed out, we can do a fairly massive blitz of information to a lot of investors. It is theoretically possible to carry the day!

Paul
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No. of Recommendations: 3

Through the internet, that's how! There are *a lot* of stock discussion boards. Each member of this board is certainly part of a discussion group elsewhere in cyberspace. Some of these are stock discussion groups, some not. But, even if not a stock discussion group, they will have stock owners amongst them, and they will know people on other stock discussion groups (i.e. Yahoo).


Excellent idea! I have been feeling a little guilty that Rodger has been doing almost all the work on this. This is a way we could pitch in.

Also, talk to other AAPL stock holders you know. Most people never send in their proxies. I will commit to talking to my mom (400 shares).

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No. of Recommendations: 7
here is a direct and quick "to the point request" that you can ask Fred about next time you e-mail him.... and everyone should be able to see the value of.....

Apple should release a statement in an SEC filing when ever a series of grants of ESO's to employees of any kind adds up to more than 1 million possible shares combined, and this statement of grants should be released within a week that these grants are made, the statement should including total outstanding ESOs to date, and an average of the strike prices similar to what they do now but they only do it once a year.....

here is another one....

When ever the stock price drops below the strike price of 80% of the ESO's outstanding, the company should buy back enough stock to cover 50% of the number of outstanding ESOs..

that would benefit shareholders, because it removes dilution, and it sets a price where the company would guarantee to make money, if those ESO's ever get excercised.... which is the point....

this generates real money in the bank for the company (buying stock low, and selling it back higher (at the exercise price))....

right now the stock is below 100% of the ESO's outstanding (except for any they just granted) which could be as high as 10% of the entire company just this month.... last year it was 6%, the year before 10%

jon.
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No. of Recommendations: 6
I'm a bit bothered by Fred's statement that "The Board has told us NOT to buy back any shares" (if I read it correctly). All I can figure is that they want to preserve cash at all costs which implies (to me) that they are worried about "survival". Otherwise why wouldn't you buy everything you could at $14? ...Lee
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No. of Recommendations: 5
Roger,
Thanks for all your efforts. I especially appreciated your comments about FAs' responses to some of your points. It was a good insight to see him responding in a manner I can understand, bringing the somewhat mysterious world of corporate management into light. His anger and reactions are understandable; new ideas and the feeling of an outsiders presumption to 'interfere' comes with the status quo of being in a relatively isolated enviornment, somewhat the norm theses days it seems.

In contrast, I have been to some of Ben & Jerrys stockholders meetings which are the next best thing to a Dead concert; there's a fine mix of irreverence and intellegent thought to address stockholders and board members issues, all in an inclusive manner. Even the most outrageous suggestions from individuals are addressed in some respectful manner, even though most of them never even see the light of day at the podium or get near the microphone during Q&A. It seemed to be a healthy process to me.
So perhaps there's some happy medium? Are you encouraged by the process? It seems you're considering moderating your approach the next time you meet, assuming this is an ongoing project.


So when's the movie: 'My Meeting with Fred" going to be released?

david/sf
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No. of Recommendations: 8
Congratulations Rodger. Your work on this is phenomenal. If you are successful in getting this proposal up for a vote then the focus shifts towards getting enough votes to get the proposal implemented. It will be quite difficult to get enough votes to win, but you may not need an outright win to get what you want. A substantial minority could be enough to elicit some changes in the right direction.

To do so you will likely need the help of institutional investors as the latest profile on Yahoo indicates 61% institutional ownership: http://biz.yahoo.com/p/a/aapl.html

Has anyone here started contacting the mutual funds with large stakes with a copy of the proposal and why it is in their interests to vote for it? Any mutual funds you own that own Apple tell them how you want them to vote and why. Lobby the case with them. Maybe you'll make some friends in high places that can really throw their weight around.

To tell a related anecdote. Sam Isaly is a well known institutional investor in biotech companies which is the industry I follow. He owned 10% of a company called Pharmacopeia. Pharmacopeia announced a merger. Sam thought they were overpaying and that it was a bad idea. So he called up fund managers with large amounts of shares and through this lobbying got enough votes to shut it down.

The point is that you can get this done if you can convince enough of the right people to vote with you.

I wish you all the best in your endeavor. Your work truly exemplifies the spirit of the Motley Fool.




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No. of Recommendations: 3
'My Meeting with Fred"

How about "The Talented Mr. Garfinkle" or maybe "Good Fred Hunting".

David
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No. of Recommendations: 0
Can someone post a copy of the proposal here. I would like to view it!

Great work.

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No. of Recommendations: 2
I'm a bit bothered by Fred's statement that "The Board has told us NOT to buy back any shares" (if I read it correctly). All I can figure is that they want to preserve cash at all costs which implies (to me) that they are worried about "survival". Otherwise why wouldn't you buy everything you could at $14? ...Lee

Ever hear the phrase "House rich and cash poor"? Seems to me that the Board has decided that preserving cash for strategic purposes is more important than reducing the outstanding shares.

joe
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No. of Recommendations: 1
Excellent idea! I have been feeling a little guilty that Rodger has been doing almost all the work on this. This is a way we could pitch in.
Also, talk to other AAPL stock holders you know. Most people never send in their proxies. I will commit to talking to my mom (400 shares).


And, I'll promote the proxy on several other lists.

Paul
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No. of Recommendations: 3
Ever hear the phrase "House rich and cash poor"? Seems to me that the Board has decided that preserving cash for strategic purposes is more important than reducing the outstanding shares.

Assuming that you trust them. I would agree with that interpretation. Because perhaps a company comes along that sometime they'd really like to buy. Or, maybe they'd really like to do something else with that cash. If its in shares then it becomes more difficult (not that the proposal mandates any share buybacks at all).

This also supports one of Fred's reported comments that the big brokerages are always pushing them to buy back more shares and get active in the market (which is of course how the brokerages make money) when they'd rather have the money has a foundation to steady the company in this down economy.
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No. of Recommendations: 0
Is Apple an S&P 500 company?

wondering if I should write Vanguard.

Paul
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No. of Recommendations: 0
Is Apple an S&P 500 company?

It sure is.
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No. of Recommendations: 1
I would like to suggest the movie title "Fred and Me" which chronicles Rodger's efforts to get through to Fred Anderson. Similiar to the movie "Roger and Me" where Michael Moore tries to track down GM Chairman Roger Smith.

On a more serious note, excellent work Rodger! I do like the idea of a share repurchase at a price below which ESOs are granted. This provides excellent value to share holders.

Chris, who does own AAPL shares.
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No. of Recommendations: 0
Rodger rocks. Thanks!

crassfool
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No. of Recommendations: 6
I think this is a great thing. These guys need to be woken up to reality. The idea of AAPL repurchasing stock at $50 -- I can't even imagine it.

It's too late, I'm sure, to make a constructive suggestion on this. Earlier I questioned whether the company should announce publicly its target pricing for repurchases. As I reread the entire proposal, it seems a bit cumbersome to me.

Next time, it might be much simpler to propose something like this: Apple Computer Inc. agrees that it will make no share repurchases at prices exceeding 20 times reported earnings for the preceding 12 month period.

That would cut out the most egregiously expensive repurchasing, which is what I'd be most worried about, were I an AAPL stockholder.

I'm amazed by Fred's statement that "If they'd known the price was going to drop, they wouldn't have repurchased when they did." I see nothing in AAPL's financial results which would lead one to believe that purchasing stock at $50 in the past few years would have been a good buy. It's a little disturbing that the CFO doesn't seem to see the same thing.

UsuallyReasonable
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No. of Recommendations: 11
The original summary is up to 79 recs., and counting. I've gotten too big a share of the praise here. Without the support and help of the rest of you, the meeting with Fred never would have happened. You all need to give each other more compliments and recs.

Also, this effort is begining to reach a broad audience outside our own little AAPL board. When enthusiastic new helpers come along, we need to do our best to help bring them up to speed and get involved in the cause.

Here are some quick links we can point interested parties to:

The Proposal
http://boards.fool.com/Message.asp?mid=18298668

The Letter to the SEC
http://boards.fool.com/Message.asp?mid=18349625

The Letter that got Fred's attention
http://boards.fool.com/Message.asp?mid=18450121

The Fool on the Hill column
http://www.fool.com/News/Foth/2003/foth030124.htm

The Summary of my meeting
http://boards.fool.com/Message.asp?mid=18480902

Unfortunately the message board posts are only available to Fool subscribers. Perhaps someone is willing to set up a brief informational website we can all link?

In the meantime, everyone who wants to help needs to write to investor_relations@apple.com and state their support for the issues we are presenting.

Apple shareholders can state that they support the proposal and are concerned about corporate governance issues.

Non-shareholders can state that they would likely become Apple shareholders if Apple sets a good example with regards to corporate governance and diversifies the Board of Directors by adding a wider range of individuals who are representative of the company's most important constituencies. (Anyone want to help me state that more concisely?)


Rodg.
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No. of Recommendations: 2
jrbill94 said

To do so you will likely need the help of institutional investors as the latest profile on Yahoo indicates 61% institutional ownership: http://biz.yahoo.com/p/a/aapl.html
Has anyone here started contacting the mutual funds with large stakes with a copy of the proposal and why it is in their interests to vote for it? Any mutual funds you own that own Apple tell them how you want them to vote and why. Lobby the case with them.


Forbes article
01.24.03, 8:48 AM

NEW YORK - The U.S. Securities and Exchange Commission voted yesterday to adopt a rule requiring mutual-fund managers to disclose how they cast proxy votes on behalf of their investors. It also voted to require lawyers to report suspected securities fraud at a company to top executives or directors--but not to the SEC itself. Instead, it asked for comments on an alternative plan that would require the company to promptly tell the SEC if a lawyer had withdrawn and why.

Lobbyists for lawyers and mutual funds are paid rather handsomely to care about such rules--and they do. Should anyone else care? That's hard to say.

The new mutual-fund proxy disclosure rule is being billed as a defeat for the fund industry because it lobbied against the rule. Fund managers say the rule would cost them money and time and it's a waste because no one cares how they vote anyway.

http://www.forbes.com/home/2003/01/24/cx_da_0124topnews.html

gammil


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