Mum on Succession, Board Got Heat

Steve Jobs has been battling cancer and related effects for seven years, but directors of Apple Inc. had been largely silent on who would succeed him until Wednesday, when it named Tim Cook the company's new CEO.

Photos: Steve Jobs Through the Years

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Timeline: Steve Jobs and Apple

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Photos: The Apple Evolution

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The board's reticence about Mr. Jobs's health and succession has rankled corporate-governance watchdogs, investors and even some close to the company. Jerry York, a now-deceased outside director, had said in 2009 that the company should have been more forthcoming about Mr. 

Jobs's health

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Apple's board has long drawn criticism for being too cozy with Mr. Jobs. The board has seven members, small for a company that size, several of whom have deep personal connections to the founder. A shareholder resolution to require Apple to prepare and disclose a written succession policy was backed by investors representing roughly 30% of shares voting at Apple's annual meeting in February.

"From a corporate governance point of view, transparency is very important when you're an investor,'' said Jeffrey Cohn, a succession-planning consultant and author in New York.

Mr. Cohn said Mr. Cook, who filled in for Mr. Jobs during two medical leaves, has steadily emerged in recent years as the heir apparent. "Why didn't the board just say that 'Tim is our guy,' " before Wednesday? Mr. Cohn asked.

But other governance watchers said Apple directors had deftly navigated the delicate task of grooming a successor for an ailing but iconic founder-CEO.

"I think Apple has done a great job at this," said David Larcker, a professor at Stanford University's Graduate School of Business and director of its corporate-governance research program. He said Apple performed well with Mr. Cook at the helm during Mr. Jobs's leaves, as its financial results, and stock price, continued to rise.

"I think they were pretty forthright" that Mr. Cook would be the next CEO, Mr. Larcker said. "It seemed like it went in an orderly manner."

The Wall Street Journal reported last month that some directors had discussed CEO succession with executive recruiters and the head of another technology company. The Journal said the discussions were informal and it didn't appear that the directors were acting on behalf of the full board.

Apple shares declined roughly 5% in after-hours trading following the announcement, suggesting that investors were concerned, but not shocked.

Apple spokeswoman Katie Cotton said the board had had a succession plan for several years, but kept it confidential for competitive reasons. "The board implemented its succession plan today and named Tim Cook CEO," she said.

Thomas Saporito, CEO of RHR International, a leadership-development consultancy, suggested that Apple directors concealed their succession plan out of respect for Mr. Jobs.

In opposing the shareholder resolution to require a public succession plan, Apple's board said it "maintains a comprehensive succession plan throughout the organization," including the CEO, and reviews it annually. The board said requiring a more public plan would "micro-manage" the company and give Apple's rivals an unfair advantage.

"The board was trying to protect Jobs and protect against the appearance of having unstable leadership at the top,'' said Mr. Saporito, a management psychologist who specializes in CEO succession.

Apple directors faced the dilemma of trying "to be more vigilant and on top of succession, but not disrupt the CEO who is in place,'' Dr. Saporito said. After all, he said, Mr. Jobs "is the very soul of Apple.''

Questions about successors to Mr. Jobs may not go away. Stephen Davis, executive director of the Millstein Center for Corporate Governance and Performance at Yale School of Management, criticized Apple's board for being "opaque" about Mr. Jobs's health and said the board should disclose a succession plan for Mr. Jobs as chairman, the post to which he was named Wednesday.

Apple hasn't had a chairman for years. Mr. Davis said Apple should clarify Mr. Jobs's role as chairman and his health situation. "Being a chairman is not just a name,'' Mr. Davis said. "There are real responsibilities,'' particularly at one of the most valuable companies in the U.S., based on market capitalization.

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