Most people would be happy earning $4.2 million in a year. For Apple’s CEO Tim Cook, however, his 2012 salary is 99 percent lower than in 2011.
Timothy Cook received a base salary of $1.4 million and a cash bonus of $2.8 million in 2012. Cook took over the world’s largest company by market cap after Steve Jobs stepped down in the summer of 2011. Because of the transition, he received Apple shares worth $376 million in 2011. Given the extraordinarily large share compensation in 2011—he received none in 2012—his salary dropped a staggering 99 percent.
This decrease in pay comes despite having beaten internal performance targets. According to Apple’s SEC filing, the maximum goal for net-sales in 2012 was $140 billion and $40,7 billion for operating income. Cook manages to beat both numbers, delivering $157 billion and $55 billion respectively.
However, performance targets only influence cash bonuses, which in Cook’s case reached the maximum of 200 percent of base salary. The majority of the compensation of any director is share based, however. This way, the company wants to ensure the long-term growth of shareholder value.
“The Compensation Committee believes long-term equity awards in the form of [Restricted Stock Units] are the most effective way to attract and retain a talented executive team and align executives’ interests with those of shareholders,” it says in the SEC filing.
Mr Cook’s $376 million stock award for example will only become fully transferable after ten years. He is not scheduled to receive other stock awards as long as he will serve as CEO. Other directors will receive stock awards every two years and those shares also won’t be fully transferable for a longer period of time.
If Apple’s share price continues to rise, this compensation which is calculated using share prices of 2011 and 2012 respectively could be much higher after the lock-up period expires.