Reports of Tim Cook's Pay Cut Greatly Exaggerated
Dec 28, 2012 5:00 AM PT
Apple CEO Tim Cook's salary fell by US$373.8 million in 2012. Then again, it really didn't.
According to a filing with the Securities and Exchange Commission, Cook earned $4.2 million in executive compensation in 2012 -- $1.3 million in salary and $2.9 in non-cash compensation.
Last year, Cook's compensation was reported as $378 million. Most of it -- $376 million -- was in the form of restricted share units. Less than $1 million -- $900,000 -- was salary.
Actually, if the non-cash compensation is stripped from the equation, Cook has received salary increases over the last three years -- $800,000 in 2010, $900,000 in 2011 and $1.3 million in 2012.
Restricted share units have no value when they're issued. Their value is pegged to Apple's stock price and are time-restricted. In Cook's case, he'll be able to get his hands on half of his in 2016 and on the other half in 2021.
Big Numbers Attract Attention
Nevertheless, since bigger numbers attract more attention than smaller ones, last year Cook's executive compensation was cited as $378 million.
That placed him at the top of the Wall Street Journal/Hay Group executive compensation study ahead of fat cats like Oracle CEO Larry Ellison ($76 million, most of it stock options), CBS CEO Leslie Moonves ($69.3 million, $30 million of it a bonus), JCP CEO Ron Johnson ($53.3 million in RSUs) and Motorola Mobility CEO Sanjay Jha ($46.6 million, most of it stock options).
The calculation also set up this year's headline about the precipitous plunge of Cook's compensation.
A decision by Apple's Compensation Committee to pay dividends on the RSUs held by its executives would have added another $75 million to Cook's purse, but the CEO declined to accept the money.
Below CEO Median
"In deciding to increase the cash compensation for Mr. Cook, the Compensation Committee considered the Company's financial results, Mr. Cook's responsibilities as CEO, and his total cash compensation opportunities as compared to the total cash compensation opportunities of the other named executive officers as well as the total cash compensation opportunities of CEOs at peer companies," Apple said in its SEC filing,
"Despite this increase," it continued, "the target annual cash compensation for Mr. Cook remains significantly below the median annual cash compensation level for CEOs at peer companies."
For most working stiffs, there's a connection between pay and performance, but in the CEO stratosphere, that connection can be obscure. "When you get to the level that Cook's at, compensation is almost a status thing," Rocco Pendola, director of social media at TheStreet.com, told MacNewsWorld.
That's why it's highly doubtful much can be determined about what Apple's board feels about Cook's performance from the compensation numbers released Thursday.
"Some of us may not agree with some of the moves Cook has made but at the end of the day, Apple is still the dominant company," observed Pendola. "If the board were punishing Cook with a pay cut, then every other CEO in the country should receive a massive pay cut."
Missing The Point
Executive compensation can be a distraction to the market, maintained Trip Chowdhry, managing director for equity research at Global Equities Research.
"The market should be focused on a company's product line, innovation philosophy and employees. That's it," he told MacNewsWorld. "Apple's success isn't caused by how much Tim Cook makes. Apple's success is caused by how customer-centric it is under Tim Cook."
On a customer-centric scale of one to 10, he added, Apple was an 11 under Steve Jobs; it's a two under Tim Cook.
"The discussion of Apple that should be done from the market perspective is why Apple is not as customer-centric today as it was in the past," he asserted. "Why has it gone off track? What will it take to bring it back on track? Cook's compensation isn't part of that equation or discussion."