Will Apple’s New Executive Stock-Holding Rules Improve Shareholder Confidence?

Apple Inc. (NASDAQ:AAPL) has implemented a new corporate bylaw that requires executive officers to hold three times their annual base salary in Apple stock. Executives have five years to satisfy the new stock requirement and must maintain the salary-stock ratio based on the “fair market value” of the stock, as outlined in Apple’s Stock Ownership Guidelines. The new rule took effect on Feb. 6 and was described by Apple in a statement on its website as “part of our efforts to further enhance corporate governance and serve our shareholders’ best interests.”

Shareholder confidence in Apple has taken a hit over the past several months, ever since the stock price fell over 30 percent from a historical high of over $700 in September 2012. The change in executive stock-holding rules is a reversal for Apple, according to Lessin and Lublin of The Wall Street Journal, who report that the changes came “even though a month earlier, Apple’s board urged shareholders to oppose a very similar corporate governance measure proposed by a shareholder .”

A more stringent executive stock ownership revision known as Proposal No. 5 would have required Apple executives to hold at least 33 percent of their shares until they retired, but this was defeated at last Wednesday’s shareholder meeting.