If Apple Doesn’t Perform Well, Tim Cook Has Millions In Stock On The Line

timcook

Top Apple executives get really good stock compensation as an incentive to stay with the company. In the past, stock awards have typically been granted by Apple’s board on a restricted basis, meaning that a certain number of shares is set aside to be given years down the road. The obvious incentive is that the executive does well and helps Apple succeed so that the stock is cashed in for more than when it was granted.

Tim Cook was awarded 1,000,000 restricted shares in Apple when he became CEO, but the shares weren’t tied to Apple’s overall health as a company. He would get them all over time as long as he stayed at Apple—whether the stock value bottomed out or rose exponentially.

A recent update to Cook’s stock compensation—at what appears to be his own request—changes the terms to focus on Apple’s actual performance. If Apple doesn’t perform well under Cook’s tenure, millions of his own dollars are on the line. His stock is currently worth around $413 million.

According to a filing with the SEC, Apple’s board approved an update to Cook’s compensation package that puts nearly half of his shares in jeopardy. “Under the adopted modification, Mr. Cook will forfeit a portion of the 2011 CEO equity award, which was previously entirely time-based, if the Company does not achieve certain performance criteria.”

Under the old agreement, Cook was set to receive 500,000 shares in 2016 and the other half in 2021. Now that shares will be awarded based on performance, smaller awards will be issued yearly. If Apple’s total return to shareholders continues to stay in the top third of S&P 500 listed companies, Cook will end up receiving the full value of his stock. But if Apple drops out of the top third section, the amount will start being reduced up to 50%.

Longtime executives have had some great paydays recently because Apple’s stock, despite the massive drop in value over the past several months, has been steadily rising for the last several years.

Cook is “leading this initiative by example”, according to the filing. He doesn’t have anything to gain—other than receiving smaller amounts of shares faster—and he has millions to possibly lose. It’s a way of rallying with shareholders to prove loyalty for the long haul. Performance-based stock options will start being applied to other Apple executives as well.

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  • MrsCleaver

    “If Apple Doesn’t Perform Well, Tim Cook Has Millions In Stock On The Line”

    …just as Steve Jobs had millions on the line, and Jeff Besos with Amazon, and all the other major players. You have to risk big money to make big money.

    As far as “If Apple Doesn’t Perform Well”, it will. Whatever Apple does, earthshaking as those developments have been throughout its history, it’s never enough for its detractors or the “analysts.” Apple is in great heath, and will be for a long time.

  • Market_Mayhem

    Tim Cook is definitely going to take a big pay cut on his next pay day. He doesn’t have a clue on how to make Wall Street put a higher valuation on his company. Apple’s P/E ratio is back to 9.x even after a bond issuance, stock buyback and an increased dividend. Hell, Wall Street has set Apple’s growth rate to less than zero. Even Oracle and Microsoft have a P/E ratio higher than Apple’s. Apple’s P/E ratio is less than half of Google’s P/E ratio. There’s no way Tim Cook is going to get his full pay. I hope he enjoys feeling the same pain as Apple shareholders have been suffering over the last eight months or so. Tim Cook isn’t risking big money. Amazon makes more costlier acquisitions than Apple does. All Apple does is sit on its huge mountain of cash, doing practically nothing worthwhile with it. Not one thing Apple does ever gives the company a bright future in Wall Street’s eyes. Like Steve Jobs, Apple has been declared a dead company. Tim Cook gives investors no confidence at all.

  • joewaylo

    He’s already losing it with the iOS 6. And heavily criticized now with iOS 7. He’s lucky the big announcements made the market rise up to the highest in October with iPhone 5 announcement then it violently declined throughout the year before slight rise for iOS 7. It fell 28 points right after and only has 80 points remaining until it reaches the 323 marker back on June 23 2011.

  • Boo Radley

    And Steve Jobs didn’t? I hate what journalism has become: The speculation and documentation of human suffering. Ugh.

About the author

Alex HeathAlex Heath has been a staff writer at Cult of Mac for over two years. He is also a co-host of the CultCast. He has been quoted by places like the BBC, KRON 4 News, and books like "ICONIC: A Photographic Tribute to Apple Innovation." If you want to get in touch, additional contact information is available on his personal site. Twitter always works too.

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