After precipitous stock slide, Apple Board puts 40 percent of Tim Cook’s pay package at risk

“Are you an investor who feel bummed out about Apple’s 41 percent stock slide in the last year? Tim Cook feels your pain,” Peter Kafka reports for AllThingsD. “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.”

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

Kafka reports, “In a document filed with the SEC today, 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.”

Read more in the full article here.

[Thanks to MacDailyNews Reader “Ellis D.” for the heads up.]

46 Comments

    1. I view it as the beginning of the end of Apple. Apple will now be catering to investors with a 90 day horizon. Will it take a chance on an innovative product, or will it play it safe and follow the advice of the bankers? I’m getting very nervous. Glad I’m mostly in cash right now.

        1. I’ve been heavily invested in AAPL for 10 years now, dipshit. I was planning on buying back in before the next ex-div date, but now I am not so sure. I don’t like some of the things I’m seeing.

          1. +100 You can’t lose money by taking your profit. You should have an even lower reentry point in the next month. But I’d be careful, earnings for this quarter don’t look good. There are going to be an awful lot of bargains out there in the next few weeks. Apple the company makes the best stuff going. AAPL as an investment has its issues. Much better opportunities in other places. Maybe in August?

            1. In most years, the price of AAPL drops after WWDC (the intro of the original iPhone being one huge exception), and hits a low for the year sometime in July or August. I needed to change brokerages, so it seemed a good time to be nearly all out. I sold back around $440-ish, and have been retaining just a few shares with the bulk of my assets in cash. This is always a nervous time for me. I always have that feeling that the train will leave the station without me. But this strategy has usually paid off for me.

              I feel a little better about it this year because all new products have officially been put off until “next Fall”, and we’ve been warned of low earnings until then. If I were buying options right now, which I have done in the past, I would be buying Jan 14 Calls. But lately I’ve shied away from options because that market has become even more irrational than the market for common shares.

          2. Your response makes no sense to why you would be nervous. If your money was still in Apple, then I could see why you could be a bit nervous (like many of us are now). But since you say you’re mostly in cash, it makes no since to be nervous. Very contradictory!

            “I view it as the beginning of the end of Apple. Will it take a chance on an innovative product, or will it play it safe and follow the advice of the bankers?” For someone who was heavily invested in Apple, you sure don’t know much about the company you WERE invested in.

            1. No, you really don’t understand. Back in 2001 I began looking for an alternative to the Wintel world because it had become obvious to me that people bought those products only because there was a monopoly created by poor business decisions in enterprise and intentional incompatibilities with competitors. It didn’t matter how bad a piece of Wintel hardware or software was, the clueless enterprise decision makers bought it, and anyone who wanted compatibility had to buy the same thing. Because of this we lost companies like Commodore and applications like Word Perfect.

              By 2003 I had seen enough to realize that Apple would eventually beat the Wintel system (and it has). You can check my posts here over the last 10 years, if they are still around. It beat the Wintel monopoly because one man drove the process of innovation and creation at Apple. He was a man who ruthlessly weeded out the mediocre and the needlessly complicated. He put himself in the place of his customers and tried to envision what their needs would be, instead of that for which they clamored. He paid no attention to the blathering financial establishment because they had already written him and Apple off. His LAST priority was his own compensation. Steve Jobs was a giant.

              Now we see Apple capitulating to the financiers. They wanted a dividend. They wanted a buyback. They want low priced products. They want executive decisions made that will enhance the short term stock value. This has been the death knell for other companies. I’m beginning to question whether Apple is still on the right path.

              I am not a Tim hater. I think he is the right man for Apple from a management viewpoint. I question whether he has the strength to resist a BOD who seems to have come off the rails. Steve would have done it. I’m not sure Tim has that ability.

              As for investing history, I started out with less than $10K in 2003. I bought my first shares at under $8. I bought 20 Call options contracts with a strike price of $150 for next to nothing when Apple was at $100 and sold them a year later when Apple was at $200. I’ve made a LOT of money, a life changing amount, by being faithful to the Apple story in the face of continuous FUD, derision, and negativism. But at some point the story begins to die. I sincerely hope that this isn’t that point.

            2. This is not that point, Zeke. The big joy ride and crash unnerved a lot of people. They sensed a disturbance in the force. Institutional investors, analysts, tech reporting converged in a froth of uncertainty. The horror show penetrated the serene chambers of Apple’s execs. We’ve seen some of what Tim decided to do about it in the last few months.

              You have to admit that the needle isn’t pegging with every rumour any more, now that the glitch in Apple’s behaviour pattern is past and cash is being disbursed. Tim’s performance at the Senate hearings may have helped, too. After WWDC, colourful new life was released into the wild, spoiling the plots of the Cassandras. The worst is over.

              Sure, investors are sore and still jittery, but they need realise the stars are out and shining brightly; deep within their forges they continue creating the best stuff in the universe—carbon, silicon, iron—organics—intelligence—jewelled machines—hope and delight. Life is good, and it will get better.

            3. Thanks, Hannah, I hope you are right. I’ve been through some very bleak times with Apple, and have not lost the faith up to now. I’m keeping a cautious eye out. Right now, I’m planning on getting back in 100% before xdiv. But I may forego the dividend if things seem to be going south badly.

      1. Actually this has always been my primary concern for Apple without SJ at the helm. Don’t get me wrong, Steve was no god in my book, but he did have some unique attributes compared to almost anyone else out there, and being stubbornly self possessed was one. The fear you express in your post was exemplified by Apple in the middle 90s before SJ came back to Apple, it’s executives then bent and twisted to just about every whim and Apple was headed nowhere but down. I must say, though, I don’t see TC as a reed in the wind when it comes to innovation and product direction for Apple. Some have bitterly resented his ability to apologise for being less than perfect, but his actual track record, so far, is that he does not bend and twist Apple’s direction with every whim of WS. In fact, he hasn’t done any of that, so far. In terms of what he actually does he strikes me as being about as self possessed as Jobs.

    1. Besides, it is not fair; the package was arranged back in 2011 when Apple’s share were at lower price than at any point after Cook became CEO.

      So now them all of sudden backtracking their deal does not look at all.

  1. What kind of sense does this make? The stock price is a ponzi scheme at best. Why not evaluate Cook on profit and loss? That would seem like a more reasonable metric to judge the CEO on.

    1. I”ll keep mine thanks, in fact I will be buying more. You simply do not understand ANYTHING about Apple if you think they care more about the stock price than their long term success. Apple under Tim made several smart moves at WWDC this year, and there are more to come. AAPL under $420 a share is a no brainer buy.

      1. Buy more Apple stock if only on the basis that it shouldn’t get much worse than it is now if the economy stays the way it is. If the stock goes down, I still receive the dividends. Apple seems to have a steady revenue stream even in this economy, so the cash will continue to build. Almost any hit product will boost Apple’s share price, so there’s really nothing to worry about. The upside is there.

        It’s just that it’s hard to ignore the news media and the outflow of bad news for Apple. It’s almost nonstop. The constant threat of Apple losing value to Android must really generate hits.

  2. So Tim Cook sucks, eh? I don’t think so:

    Cook is ‘leading this initiative by example,’ and has pushed the company’s board to add more risk to his pay package.”

    Tim Cook is on top of EXACTLY how to run a successful company amidst rabid Wall Street parasitism. You always put the CEO in jeopardy when the company is in jeopardy. In this case that ‘jeopardy’ is invented via Apple Bear bullshit and gangs of idiot ‘I’m entitled’ Wall Street desperate, self-destructive parasites.

    Watch with time. Either Wall Street catches up with Apple’s professionalism, or it guts itself, aka cannibalism. Apple will obviously survive whatever and continue to thrive.

    No doubt Cook knows business cycle theory and expects all of the above. As a great CEO, he is willing to ride the high waves as well as low. Apple is lucky to have such a pro at the helm.

    I really don’t care what any Apple Bear bullshitters have to say and I don’t have any worries about Apple. People will go all maniacal as a result of the forces outside of Apple, many of which have pummeled the perceived value of AAPL. Have fun with that. In the long term, I continue to not know of any better company than Apple. And so forth. So say I. 😀

    1. Totally agree. This isn’t a reflection of Tim Cooks or Apple’s performance whatsoever and who ever thinks so should have nothing to do with how Apple decided things. This of course applies to analysts, pundits, haters, and Wall Street.

      Steve Jobs made it clear that this is an ever changing industry. Apple will dip and rise but as long as Apple remains true to its virtues then THAT is the company for me.

    2. Fine sentiments, and true for all that. I must add that Tim Cook is showing interesting new signs of leadership that could reverberate across other industries. The very fact that he places himself in such jeopardy signals his understanding of the special intersection of business and the humanities that Steve Jobs talked about. What other CEO would have done something like this? Would you?

      Tim’s position is an extreme expression of confidence in himself and his firm to beat the (phony) malaise and its propagators through actual performance, more extreme even than becoming a member of the largely symbolic $1 annual salary club.

    3. Not only is this ‘leading this initiative by example’, but it also sets an great example for corporate governance standards and raises the bar for all parasitic CEOs.

      With this Tim Cook move, he is putting his money where his mouth is – and he is taking full responsibility, by ‘having skin in the game’ like all real investors.

      This move is tantamount in principal to Steve Jobs taking a $1 a year salary, it shows Tim’s DNA to be consistently like and kind aligned.

      Leadership by example is a trait all leaders in every field should embrace and follow, it goes a long way to confronting and quelling sinister, bullshit and misleading Tim Cook allegations.

      Hats off to the man!

  3. LOLZ. Seriously. Instead of getting $100 million he ends up with a paltry $60 million. My heart bleeds. I don’t think it’s going to help Apple change how to run the company to boost its valuation any. There has got to be something Apple can do to get its valuation up to where Microsoft’s P/E or at least half of what Google’s P/E is. I mean, for chrissakes, the company isn’t performing as poorly as Oracle is and even Oracle has a P/E of 14.

    Anyway, Tim Cook is feeling no pain whatsoever. He’s got a comfy position, a nice office, has full knowledge of Apple’s product pipeline and has the power to make decisions. It’s not like being an Apple shareholder, getting totally blindsided by a company that has an abundance of wealth. Hardly any of that cash flow is filtering down to the most recent investors. We’re at the mercy of Tim Cook’s decisions. He’s like Zeus on Mount Olympus hurtling down lightning bolts to hapless shareholders. He needs to take a few lightning bolts himself to see how painful it feels.

    1. LB : You are correct, he is loaded and if he never made another dime would be a gazillionair forever. He won’t ever have to worry about where his next meal comes from. Or if he can afford that new car. Having said that, that doesn’t mean that he’s evil. CEOs of large corporations are rewarded handsomely. Perhaps too handsomely. But that’s another issue for another day. And I am undecided as to whether I’m happy with him or not. Some things I like, some things I don’t. He’s a supply-chain guru so perhaps he’s not the perfect choice as the CEO? But he’s in there so we’ll just have to deal with it for a while. But you have to give him (or someone) credit for coming up with this idea of pay being tied to performance at Apple. It’s nothing new, it exists at the highest level in other corporations but not all corporations. We will never know if this was really his idea or something the executives and the board cooked up as a good PR move? But I have to give them an E for effort at least. I do believe that he’s an honest man and a very hard worker. Something that you just can’t say about all CEOs.

  4. With all the problems that Apple facing now. What is the best solution for Apple to cure the parasites , bad media, blood sucker analysts and Wall Street?.

  5. meanwhile samsung family members are busily suing each other.

    cnet, feb 2013

    “Samsung Chairman Lee Kun-hee is breathing a sigh of relief today after a Korean court ruled that he won’t need to hand over assets to family members.
    Lee’s siblings sued him over their contention that he hid from them billions of dollars in shareholdings he inherited from his father, Samsung’s founder.”

    —-
    See the difference between the leadership of the two companies?

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