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Vote
FOR Proposal #6 to request a report
on
the Company's policies on freedom of
expression
and access to information
(NASDAQ:
APPL)
Meeting Date: February 26, 2020
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To
Apple Shareholders:
SumOfUs
urges you to vote FOR Proposal 61 at the annual meeting of Apple shareholders on February 26, 2020.2
Proposal 6 calls on Apple’s board of directors to annually prepare a report on the Company’s policies addressing freedom
of expression and access to information.
The
proposal is as follows:
Resolved,
Shareholders of Apple Inc. (“Apple” or the “Company”) request that the Board of Directors report
annually to shareholders, at reasonable expense and excluding confidential and proprietary information, regarding the Company’s
policies on freedom of expression and access to information, including whether it has publicly committed to respect freedom
of expression as a human right; the oversight mechanisms for formulating and administering policies on freedom of expression
and access to information; and a description of the actions Apple has taken in the past year in response to government or
other third-party demands that were reasonably likely to limit free expression or access to information.
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Apple
is coming under increasing public criticism for its failure to protect freedom of expression and access to information in markets
where it operates. According to Freedom House, “Digital authoritarianism is being promoted as a way for governments to control
their citizens through technology, inverting the concept of the internet as an engine of human liberation.”3 The
proponents of this resolution find that the companies disclosures addressing the governance and management of human rights-related
risks is inadequate. In particular, the company’s operations in China expose the Company to human rights risks, and it is
unclear what the Company’s plan or response is.
Human
rights risks in China
Apple
has operations and sales throughout the world, and several countries, including Russia and Turkey, have been identified as
locations of the human rights abuses. But China represents particularly high risk on human rights front. China is both a huge
market for Apple, representing 20% of global sales, and it is an essential part of its supply chain, manufacturing the iPhone
and many other products. According to research released last year by Standard Chartered Bank, China is likely
to become the world's biggest economy at some point in 2020, when measured by a combination of
purchasing-power-parity exchange rates and nominal gross domestic product.4 Clearly, Apple’s relationship
with the Chinese government is extremely delicate.
1
https://www.sec.gov/Archives/edgar/data/320193/000119312520001450/d799303ddef14a.htm#toc799303_39
2
https://www.sec.gov/Archives/edgar/data/320193/000119312520001450/d799303ddef14a.htm
3
https://freedomhouse.org/report/freedom-net/freedom-net-2018/rise-digital-authoritarianism
4
https://www.businessinsider.com/us-economy-to-fall-behind-china-within-a-year-standard-chartered-says-2019-1
In
China, the situation is devolving into a full-blown human rights disaster with millions of people deprived of their freedoms,
parents separated from their children and some people even losing their lives. Recently there have been numerous press articles
and public outrage about severe repression and police brutality against Hong Kong pro-democracy protestors and the government’s
efforts to force millions of Uyghurs and other Turkic Muslims into internment camps. The New York Times reports: “As many
as a million ethnic Uighurs [sic], Kazakhs and others have been sent to internment camps and prisons in Xinjiang over
the past three years, an indiscriminate clampdown aimed at weakening the population’s devotion to Islam. Even as these mass
detentions have provoked global outrage, though, the Chinese government is pressing ahead with a parallel effort targeting the
region’s children.”5 Some reports estimate that number to be as high as three million.
Authorities
have built a nightmarish cybersurveillance system to control millions of people, especially Tibetans, Uyghurs and others considered
threats to the state. In 2017, Apple submitted to a broad demand by the Chinese internet authority to pull down several VPN apps —
programs that allow iPhone users to bypass the Chinese government’s censorship apparatus — from its Chinese App Store.
The company offered no public criticism of this action but rather acquiesced to the Chinese government’s demands.6
Human Rights Watch recently raised the alarm: “[W]hile other governments commit serious human rights violations, no
other government flexes its political muscles with such vigor and determination to undermine the international human rights standards
and institutions that could hold it to account.”7
In
its annual report released on November 18, 2019, the bipartisan U.S. Congressional-Executive Commission on China (CECC) said
that there is a “strong argument” that China has committed “crimes against humanity” in its northwestern region
of Xinjiang.8 Axios reports: “The commission listed several acts committed by the Chinese government in Xinjiang
that could, under the Rome statute of the International Criminal Court, support a legal case that China has committed ‘crimes
against humanity.’”9
An
article in Foreign Policy states: “The news out of Xinjiang, China’s western region, this summer has been a steady
stream of Orwellian horrors. A million people held against their will in political reeducation camps. Intelligence officials assigned as
‘adopted’ members of civilian families. Checkpoints on every corner and mandatory spyware installed
on every device. The targets of this police state are China’s Muslim Uyghur minority, whose loyalties the central government
has long distrusted for both nationalist and religious reasons.”10
5 https://www.nytimes.com/2019/12/28/world/asia/china-xinjiang-children-boarding-schools.html
6 https://www.nytimes.com/2017/07/31/technology/apple-vpn-china-dangerous-precedent.html?smid=nytcore-ios-share
7 https://www.hrw.org/news/2020/01/14/chinese-government-poses-global-threat-human-rights
8 https://www.cecc.gov/sites/chinacommission.house.gov/files/documents/EMBARGOED_CECC%202019%20Annual%20Report.pdf
9 https://www.axios.com/us-commission-says-china-may-be-guilty-crimes-against-humanity-31058b21-c92e-45b3-b18a-590c950ce34c.html
10 https://foreignpolicy.com/2018/09/19/china-has-chosen-cultural-genocide-in-xinjiang-for-now/#
Freedom
House says: “China confirmed its status as the world’s worst abuser of internet freedom for the fourth consecutive
year. Censorship reached unprecedented extremes as the government enhanced its information controls in advance of
the 30th anniversary of the Tiananmen Square massacre and in the face of widespread antigovernment protests in Hong Kong.”11
All
this presents a threat to Apple’s business, serious risk to its reputation and an enormous challenge to manage. Shareholders
need to understand these risks, how the board is overseeing these challenges, and the Company’s policies and practices to
balance these competing demands. Currently, the company’s disclosures regarding freedom of expression human rights risks
is inadequate to the task. The Business and Human Rights Resource Center conducts a survey of companies in the ICT sector regarding
human rights. Apple did not respond to the survey, and the Resource Center stated that no publicly available human rights policy
was found for Apple.12
Freedom
of expression is an internationally recognized human right
The
United Nations Guiding Principles on Business and Human Rights states: “The responsibility to respect human rights is a
global standard of expected conduct for all business enterprises wherever they operate. It exists independently of States’
abilities and/or willingness to fulfil their own human rights obligations, and does not diminish those obligations. And it exists
over and above compliance with national laws and regulations protecting human rights.”13
The
Guiding Principles reference the sources of these rights. “The responsibility of business enterprises to respect human rights
refers to internationally recognized human rights – understood, at a minimum, as those expressed in the International Bill
of Human Rights and the principles concerning fundamental rights set out in the International Labour Organization’s Declaration
on Fundamental Principles and Rights at Work.”14 Article 19 of Universal Declaration of Human Rights and Article
of 19 of the International Covenant on Civil and Political Rights reference the right to “freedom of opinion and expression.”15
Apple’s
opposition statement
The
company’s statement recommending that shareholders vote against this resolution16 confuses two distinct human
rights issues: supply chain responsibility and freedom of expression and opinion. This may be due to and a lack of understanding
of human rights risk issues or it may be an intentional effort to change the subject.
The
opposition statement addresses concerns around Apple’s management of its suppliers, including working conditions, under-age
labor, and forced labor. In the 2010 to 2016 timeframe, the Company was widely criticized for human rights abuses it its supply
chain. In a particularly notorious case, the press widely covered a rash of suicides at the Foxconn factories that produced the
iPhone and other Apple products. Since that time, under the leadership of Tim Cook, the company
has made a serious effort to take responsibility for the supply chain and eliminate these human rights abuses among its suppliers.
Guided by its Apple Supplier Code of Conduct,17 referenced in the opposition statement, the company has been able
to document dramatic improvements in many human rights metrics. For its efforts, Apple won the Thomson Reuters Foundation’s
Stop Slavery Award in 2018.18 The award recognizes companies working to eliminate forced labor from their supply
chains. The company’s management and board deserve praise for these changes.
11
https://www.freedomonthenet.org/report/freedom-on-the-net/2019/the-crisis-of-social-media
12
https://www.business-humanrights.org/en/apple-0
13
https://www.ohchr.org/documents/publications/guidingprinciplesbusinesshr_en.pdf
14
Ibid
15
https://www.ohchr.org/EN/ProfessionalInterest/Pages/CCPR.aspx
16
Apple 2020 Proxy Statement https://www.sec.gov/Archives/edgar/data/320193/000119312520001450/d799303ddef14a.htm
17
https://www.apple.com/supplier-responsibility/
18
http://www.stopslaveryaward.com/past-winners
However,
the opposition statement does not address freedom of expression and opinion, the critical issue raised by this shareholder
proposal. The statement contends that the human rights issues raised by proposal are addressed in Apple’s Principles of
Business Conduct. However, this document is not readily available on Apple’s website. A search for this document on the
website yielded nothing. And a Google search for the title of this document yielded nothing on the Apple website and only a 2010
version of the Principles contained as an appendix to an SEC filing.19 That document contained no reference to freedom
of expression or, in fact, to human rights. If there is a more current version of this document, it is not readily available to
shareholders or the general public.
Rising
investor concern
Yet
investors around the world are demonstrating rising concern about human rights risks to both companies’ reputations and
operations. Two years ago, the Investor Alliance on Human Rights (IAHR) was formed as a coalition of global funds focused on advancing
corporate human rights due diligence. IAHR now represents investors from 18 countries with over USD 4 trillion in assets under
management.20 Several members of the organization recently issued an “Investor Statement on Corporate Accountability
for Digital Rights.”21 The statement says, in part, that the signers support the use of “the Ranking
Digital Rights (RDR) Corporate Accountability Index as a tool to help [companies] improve their governance systems and performance
on salient human rights risks related to privacy and freedom of expression.”
Ranking
Digital Rights (RDR) Corporate Accountability Index
RDR’s
Analysis of Apple’s performance reveals significant deficiencies.22 RDR rates companies on three factors: governance,
freedom of expression, and privacy. On governance, Apple ranks in the middle of the pack at 15 out of 24 companies. On privacy,
Apple ranked second of 12 Internet companies and was virtually tied for first.
But
with regard to freedom of expression, the company fared poorly. It ranked seventh of 12 Internet companies and had the
lowest score of any U.S. company. The report states: “For the third year in a row, Apple had the lowest governance
score of any U.S. company evaluated in the Index. It disclosed a clear commitment to respect privacy as a human right but
made no such commitment
to freedom of expression.” The report continued: “Apple revealed little about policies and practices affecting freedom
of expression, scoring below all other U.S. companies in this category. . . Apple was less transparent about external requests
to restrict content or accounts than most of its U.S. peers, except for Facebook. It only disclosed data about the number of government
requests to restrict or delete accounts that it received, but gave no data about content removed as a result of these requests,
including data about apps removed from its App Store.”
19
https://www.sec.gov/Archives/edgar/data/320193/000119312510238044/dex141.htm
20
https://investorsforhumanrights.org/sites/default/files/attachments/2019-11/Freedom%20of%20Opinion%20and%20Expression%20Briefing_FINAL.pdf
21
https://investorsforhumanrights.org/sites/default/files/attachments/2019-01/IAHR%20Statement%20on%20Digital%20Rights_Final%20%283%29.pdf
22
https://rankingdigitalrights.org/index2019/companies/apple/index/
Reputation:
Corporate Reputation Is an Important Component of Shareholder Value
How
Apple manages its business in China and other repressive regimes will have a direct effect on the reputation of the company. And
reputation directly affects shareholder value.
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According
to a Conference Board study, companies with a high reputation rank perform better financially
than lower ranked companies. Executives also find it is much harder to recover from a
reputational failure than to build and maintain reputation.23
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In
a 2014 Deloitte survey, 87 percent of executives rated reputation risk as more important
or much more important than other strategic risks their companies are facing, and 88
percent said their companies are explicitly focusing on managing reputation risk.24
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Summary
The
well-documented reputational risks of human rights abuses and Apple’s perceived complicity in them and its inadequate disclosure
highlight the critical need for the Company to improve its disclosures and increase transparency around its policies, procedures
and board oversight of risks related to freedom of expression and opinion.
For
all of the above reasons, we believe that Apple’s current human rights disclosures are inadequate to protect shareholder
interests. We urge you to vote FOR Item 6, the shareholder proposal requesting a report on the Company’s human rights policies
and practices.
Sincerely,
Tim
Brennan
SumOfUs
23
“Reputation Risk,” The Conference Board, 2007, p. 6, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1077894.
24
“2014 Global Survey on Reputation Risk,” Deloitte, p. 4, https://www2.deloitte.com/content/dam/Deloitte/pl/Documents/Reports/pl_Reputation_Risk_survey_EN.pdf.