Apple shareholders reject China audit proposal at annual meeting

Apple shareholders today voted down a controversial proposal calling for an independent audit of the company's relationship with China, while approving all other recommendations put forth by Apple's board of directors.

The proposal, known as the "China Entanglement Audit," was submitted by the National Center for Public Policy Research, a conservative think tank. It requested that Apple conduct "an evaluation assessing risks and costs associated with the company's continued entanglement with the People's Republic of China."

Apple strongly opposed the measure, arguing that it already provides "extensive information on our international operations" and that the proposal was "highly prescriptive and attempts to inappropriately restrict Apple's ability to manage its own ordinary business operations and business strategies."

As is typical in such situations, shareholders followed Apple's recommendation and rejected the proposal. The company's board has historically maintained significant influence over shareholder voting outcomes.

In addition to rejecting the China audit proposal, shareholders approved several other measures put forth by Apple:

• Election of the Board of Directors
• Ratification of Ernst & Young LLP as Apple's independent accounting firm
• Advisory vote to approve executive compensation
• Approval of the non-employee director stock plan

This means Apple's current board of directors remains unchanged. Notably, two board members have exceeded Apple's traditional age limit for board service: Ron Sugar (77) and board chairman Art Levinson (75). Apple is waiving its standard policy that members of the board may not stand for re-election after turning 75 years old.

The age waiver is particularly significant given ongoing speculation about CEO Tim Cook's eventual retirement and the possibility that he may assume the chairman position upon stepping down as CEO.

The annual shareholders meeting continues today, and additional developments may emerge as proceedings progress. Apple's relationship with China has been a topic of increasing scrutiny given the company's heavy reliance on Chinese manufacturing and the Chinese market for revenue.

For Apple, which generates significant portions of its revenue from China and relies on Chinese manufacturing for most of its products, the rejection of the audit proposal represents a victory for the company's current operational approach. The outcome suggests shareholders are comfortable with Apple's existing disclosures regarding its international operations, particularly in China.

The meeting also serves as an annual checkpoint for Apple's governance practices, with shareholders weighing in on both routine matters like board elections and more contentious issues like the China audit proposal.