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No one looks too good in Apple's fight with David Einhorn. The Greenlight Capital founder scored a legal point, but better governance wasn't his main objective. Apple comes off amateurish. The California Public Employee' Retirement System (Calpers), despite worthy shareholder-friendly aims, seems careless. The U.S. Securities and Exchange Commission also missed a trick.
The general bumbling leaves Mr. Einhorn least blemished. He wants Apple to issue preferred stock to his own specifications, and doesn't like a provision the company planned to put to shareholders at Wednesday's annual meeting that would have made it impossible for the board to do so, at least without shareholder approval. So he sued to block the vote based on Apple's combining of the issue with several others. He won – but not on the merits of his "iPref" idea.
Apple, presumably thanks in part to its lawyers, ends up the worst for wear. Chief executive officer Tim Cook called Mr. Einhorn's lawsuit a "silly sideshow," but the SEC's rules make clear companies can't combine separate matters into one vote. Even without legal certainty – the judge acknowledged the issue has received scant court attention – the simple and safe, not to mention gracious, move would have been to untether the proposed changes when the issue came up, even if it meant delaying them. Other companies are now surely scouring their proxy statements for similar transgressions.
Then there's Calpers, which gave full-throated support to Apple. That's understandable in a sense because the package of measures included majority voting for directors as well as ending the board's ability to issue preferred stock without shareholder approval. Good governance could be threatened, however, if companies bundle dodgy proposals with sound ones – not to mention the questionable message sent by neglecting SEC rules.
The regulator perhaps isn't blameless either. Apple filed its proxy statement in December. As the judge noted, SEC inaction doesn't mean it has approved anything. Yet Apple, with its $420-billion (U.S.) market value, is the largest company under the watchdog's jurisdiction, so a degree of scrutiny is merited.
Either way, the end result is a distraction for shareholders, who now must wait to vote on desirable changes and figure out how to unbundle, in a different sense, Mr. Einhorn's legal victory from his preferred stock idea. It all takes more shine off Apple's halo.