Apple filed its proxy statement with the SEC this week, which included compensation figures for its top executives.
According to the proxy statement, Apple’s CEO Tim Cook made $US9.2 million in salary and bonuses last year.
For just about anyone in the world, that’s a great pay package.
But, Cook is CEO of the most valuable company in the world, which makes $US9.2 million look relatively meager.
Compared to his peers, it would seem that Cook is severely underpaid.
But as Yahoo Finance contributor Aron Pinson points out, that $US9.2 million figure is misleading.
If you include the value of Cook’s Apple stock that vested last year, his total compensation was over $US100 million for 2104.
Here’s how it works.
In 2011 Cook was awarded nearly $US400 million in stock. But he couldn’t just take that to the bank. Half the stock was supposed to vest in 2016 and the other half in 2021.
Cook was also awarded 875,000 shares in 2010, some of which vested last year, but we’ll get to that later.
In 2013, Apple moved to a performance-based compensation system. Cook argued that his 2011 award should be performance-based too, and Apple agreed.
Under this new system a substantial amount of Cook’s shares would still vest on the 5th and 10th anniversaries of the award, but up to 560,000 shares would vest yearly as well.
The catch was that half of those 560,000 shares would vest based on Apple’s performance that year against other companies in the S&P 500.
If Apple’s total annual return was in the top third of the S&P 500 all of Cook’s stock would vest. If it was in the middle third, only 75% of the stock would vest. If Apple was in the bottom third, only half of Cook’s stock would vest.
Apple did well last year so a lot of Cook’s stock vested.
Pinson says if you split Cook’s shares that aren’t performance-based equally over the years between when stock was awarded and when it vested, the Apple CEO got 218,750 shares from his 2010 award, 420,000 shares from the 2011 award he would have gotten no matter what, and 280,000 shares from the 2011 award he got for Apple’s performance.
That’s 918,750 shares in total. At an average vesting date price of $US101.10 per share, that’s $US92,885,625 Cook made in 2o14 from stock alone.
Added to his normal compensation of $US9,222,638, Cook’s compensation was $US102,108,263 in 2014.