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Summary:

Investors are demanding a succession plan from Apple following Steve Jobs’ most recent medical leave, which began Jan. 17. Most recently, the call for disclosure got louder thanks to support from shareholder advisory group ISS. But is full disclosure the right path for Apple?

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Investors are demanding a succession plan from Apple following Steve Jobs’ most recent medical leave, which began Jan. 17. Most recently, the call for disclosure got louder thanks to support from shareholder advisory group Institutional Shareholder Services (ISS).

The ISS’ statement, included on a proposal to be voted on at Apple’s general company meeting on Feb. 23, reads as follows:

ISS believes that shareholders would benefit by having a report on the company’s succession plans disclosed annually. Such a report would enable shareholders to judge the board on its readiness and willingness to meet the demands of succession planning based on the circumstances at that time.

It sounds like a fair and reasonable request, but that’s what it’s clearly carefully designed to sound like. If you look at what shareholders are really asking for, stripped of well-chosen wording, it becomes much less easy to swallow, for Apple’s corporate management, and hopefully, for Apple shareholders, too.

Basically, by revealing its plans for succession in firm detail, Apple is endangering the amazing depth of bench it currently enjoys. We reported on that depth in a piece last month detailing the current succession picture at Apple. It’s easy to see why the company would like to keep its plan for who’s in line for the top spot under wraps. Keeping that caliber of talent from looking toward greener pastures is no easy task, and the promise of one day reaching the top spot is one of the few things that can prevent ambitious eyes from wandering. Take that away and you could see the players furthest down on the chart taking flight. Not to mention it basically advertises top talent to competitors, making head hunting easier.

HR concerns aside, a public plan of succession at a major corporation is hardly standard practice. As reported by Digital Daily’s John Paczkowski this morning, only 35 percent of companies even have a succession plan at all, let alone a public one, and Apple is among them. Steve Jobs may carry more weight than the CEOs of other companies, but that’s no reason to go demanding a peek behind the curtain.

A 2010 survey on CEO succession planning conducted by the Stanford Graduate School of Business found that generally speaking, medium and large cap companies spend very little time on succession planning. On average, boards of directors spend about two hours a year on plans for CEO succession, and only 50 percent even have a document detailing what they’d be looking for in a successor. Sixty-five percent of firms haven’t even asked their internal candidates whether they want the job or not, and only 54 percent are doing any grooming of succession candidates. Simply put, succession planning isn’t generally a priority at most companies.

Apple’s shareholders are clearly more nervous than those of most other companies about what will happen to the company once current CEO Jobs is gone, but they shouldn’t be. More than any other company it its space, Apple has demonstrated its ability to succeed in the short-term while always planning for the long haul. The iPod, the iPhone, the iPad and the App Store are all prime examples of Apple anticipating the curve and taking advantage in a way that left its competitors scrambling to catch up. A much more specific and fresh example is Apple’s stance regarding e-books and in-app subscriptions. In both cases, it created a perfect honey trap for content providers, initially offering free platform access while quietly laying the groundwork for staking a claim on publisher and distributor profits down the road. It’s the kind of five-steps-ahead thinking that no one else in the consumer electronics space can compete with, and it’s an integral part of Apple’s culture, so there’s no way it applies only to products and not to internal management processes.

Transparency in the corporate world is generally spoken of as a good thing, but in Apple’s case, that might not be the case. With perfect transparency, there’s no way Apple would’ve achieved the level of success it has today. The cult of secrecy surrounding the company’s product plans is one of the primary reasons media outlets like this one even exist, and why an Apple press event commands the attention it does, while one from Asus or HP barely raises an eyebrow. If shareholders are happy with the company’s performance, they shouldn’t go messing with the formula that enabled its success in the first place.

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  1. Excellent article, Mr. Darrell Etherington. You are one of the very few writers with a keen intellect and the integrity to post the honest truth. Thank you. Please clone yourself.

  2. Hamranhansenhansen Monday, February 7, 2011

    Well said.

    Steve Jobs said recently that Apple is working from a plan that goes 25 years into the future. Most companies don’t know what they will be doing next quarter.

    Have you noticed the iMac has had palm rests under its screen for more than 5 years? And a few years ago, they added glass on the front. And now, iOS apps are getting ported to the Mac. And this year, Mac OS Lion adds full-screen apps with great big buttons. When they finally ship iMac touch, it will be all these preparatory steps that actually make it work well, not the touchscreen hardware.

    It is actually amazing to watch Apple simultaneously push boldly ahead yet somehow also exhibit incredible patience.

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