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This week, Apple shareholders requested that its Board of
Directors publish a report explaining how the board oversees
privacy and data security risks. The proposal, which is available
here, was prompted by concern that recent
issues such as the unauthorized access to iPhone users' address
books and the release of one million Unique Device IDs could place
the company's growth opportunities at risk.
The shareholder proposal references a recent study conducted by Carnegie Mellon
University's Cylab that made various recommendations to boards
including, annual reviews of privacy and security programs to gage
effectiveness and identify gaps and requiring regular privacy and
security reports from management. The interest in privacy and
security as risk management issues at both the shareholder and
board level is increasing. A recent study conducted by Corporate Board
Member & FTI Consulting, Inc. surveyed 11,340 corporate
directors and 1,957 general counsel regarding legal risks on their
radar. For the first time in the 12 years since the study has been
conducted, data security was noted as the most prevalent concern
among both directors (48 percent) and general counsel (55 percent).
This level of concern has almost doubled in the last four years.
For instance, in 2008, only 25 percent of directors and 23 percent
of general counsel identified data security as an area of great
concern. Moreover, 33 percent of general counsel surveyed believe
their board is not effective at managing cyber risk. This is one of
the lowest ratings among the 13 risk management areas surveyed.
When asked whether their company had a plan in place to manage a
data breach should one occur, only 42 percent of directors said
their company had a formal Incident Response Plan. Twenty-seven
percent responded that their company had no such plan and 31
percent were uncertain. Despite acknowledging such unpreparedness,
77 percent of directors and general counsel still believe their
company is prepared to handle a data breach. There is a serious
concern, however, given the disconnect between having written
response plans and the perception of preparedness. Apple
shareholders are recognizing that disconnect and apparently want to
ensure that its Board has adequately addressed it. The proposal
will be voted on at Apple's 2013 Annual Meeting.
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