Apple CEO Tim Cook links bonus to share performance

PUBLISHED : Monday, 24 June, 2013, 12:00am
UPDATED : Monday, 24 June, 2013, 4:59am

Apple's board is linking more of chief executive Tim Cook's compensation to the company's stock performance, seeking to reassure investors who have seen the shares drop 41 per cent from a record in September last year.

Cook, who received one of the largest stock-reward packages on record in 2011, requested the modification, Apple's board said in a filing. The change means about third of the chief executive's stock rewards will now be subject to a drop in value.

Cook was given 1 million Apple shares vesting over a decade after succeeding Steve Jobs in 2011. As a result of the new plan, part of that bonus will now be based on stock performance. Investors including the California Public Employees' Retirement System have urged Apple and other companies to link pay more to the stock price.

"There is quite a bit of pressure from the investor community on firms to put plans like this in place," said Allan McCall, a co-founder of executive-compensation consulting firm Compensia.

The move indicated "how much pressure there is that Apple, which has historically done its own thing with respect to compensation, seems to be responding to these things".

Apple is facing heightened competition from Samsung Electronics, Google and other firms. Apart from an updated line of MacBook Air laptops, Apple has not introduced a new product since October last year, increasing pressure on Cook to release a new device that can live up to the success of the iPhone and iPad.

The size of Cook's future stock awards will depend in part on how the firm performs compared with other companies. Of the 1 million shares Cook was awarded two years ago, half were to vest in 2016 and the rest in 2021. After the changes, Cook will get 100,000 shares in 2016 and another 100,000 in 2021, The rest will be given out in annual increments.

"He's gone out of his way to put stuff back on the table and you have to give him points for that," said Brian Foley, an executive compensation consultant at Brian Foley & Co. "But the numbers are so large that the worst that could happen is he only gets 672,000 shares. You and I could live on that."

Cook will get as many as 80,000 shares each year, half tied to the stock price. If Apple's shares are in the top third of the S&P 500 Index companies that year, Cook will receive the full amount. If it is in the middle third, he will get 60,000 shares, and 40,000 for any year in the bottom third.