Privilege for the few
Why issue preferred stock? Typically, it's done for two reasons. The first is to raise capital without diluting the power of existing shareholders; again, the preferred shares can be issued without voting rights in exchange for a guaranteed dividend. A company may prefer to issue preferred stock instead of bonds) for a number of reasons. For one thing, since a bond is essentially a loan made to the corporation that must be repaid within a fixed maturity period, the company's credit record can suffer and other nasty complications--including bankruptcy--can ensue if the company doesn't have the cash it needs to repay its bondholders. Preferred stock, on the other hand, doesn't need to have a specific redemption date; the company can usually buy back the preferred stock (if it wants to) whenever it's convenient to do so, rather than on a fixed schedule.
The second reason a company might want to create a preferred class of shares is to enact a shareholder rights plan. More commonly referred to as a poison pill, this technique allows the board of a corporation to issue preferred shares at a discount to some existing shareholders when someone attempts a takeover of the company. The entity attempting the takeover is thus excluded from the right to purchase the new preferred shares, making it hard to complete the takeover without the board's assistance.
Apple's preferred stock
It's clear that neither of these circumstances fits Apple's current corporate needs. With more than $100 billion in liquid assets, the company doesn't really need more money, and its market capitalization of more than $400 billion makes it unlikely that anyone (except maybe one or two intergalactic supervillains) would be able to launch a successful takeover attempt.
Yet, Apple's charter includes a provision that authorizes the company's board of directors to issue preferred stock at will--something called a blank check, because the board can act without having to first seek the approval of existing shareholders. And, according to the board, this provision--a remnant of a time when the company might have needed quick access to more funds or to protect itself from a hostile takeover--is against the interest of current shareholders.
Thus, the board is asking shareholders to strike the blank-check provision from the company's charter during its upcoming annual meeting. Crucially, the same proposal also asks shareholders to modify the charter in two more ways; the first affects the way the board's directors are elected, and the second assigns a nominal value to each share--a move that could provide the company with a number of tax and legal advantages in several jurisdictions.
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