Peter Kafka

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After Stock Slide, Apple Puts 40 Percent of Tim Cook’s Pay Package At Risk

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Asa Mathat / AllThingsD.com

Are you an investor who feel bummed out about Apple’s 41 percent stock slide in the last year? Tim Cook feels your pain.

And if Apple doesn’t perform in the future, he might lose some money, too.

Apple’s board has changed its pay package for its CEO, in a way that puts a big chunk of his future payouts at risk.

Short version: If Apple’s stock outperforms the market over the next 8 years, Cook will be able to keep all of the 1 million Apple shares the company promised him back in 2011, which he was previously set to get no matter how Apple’s stock fared.

But if Apple’s stock does a lot worse than the market, Cook could lose up to 40 percent of those shares.

At the time Apple granted Cook his original package, those million shares would have been worth $376 million, and when Apple’s stock peaked in the fall of 2012, they were worth $705 million. Today they are worth $413 million.

In a document filed with the SEC today, Apple says Cook “has the full support of the Board of Directors”, and notes that it is changing the way it doles out bonuses in new deals for all of its top executives. It says it made the decision after “outreach discussions this year with many of our largest shareholders .”

Apple also says that Cook is “leading this initiative by example”, and has pushed the company’s board to add more risk to his pay package, in two ways:

  • There’s no upside to Cook’s new comp setup. That is, if Apple shares do really well, he’ll still only get the shares he was promised back in 2011.
  • Apple says it wanted to put less of Cook’s shares at risk, “because Mr. Cook faces only downside risk from the modification.” But it says Cook “expressed a strong desire to set a leadership example in the area of CEO compensation and governance and requested a larger at-risk percentage.”

Takeaway: If you bet on Apple shares over the next 8 years, Tim Cook wants you to know that he has hundreds of millions of dollars at risk, too.


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