“This week, Tim Cook celebrated his 5-year anniversary as CEO of Apple,” Stephen Gandel reports for Fortune. “And he did it by receiving a big payday.”
“His anniversary present: nearly $136.5 million worth of Apple stock, related to a deal that Cook struck when he became CEO back in 2011,” Gandel reports. “In all, Cook has been paid $373 million related to the initial share deal. And he could still cash in another $360 million in the next five years, based on Apple’s current stock price.”
“A good portion of the payday, particularly this year’s, might not have happened, if not for a nifty trick that Tim Cook and Apple’s compensation committee pulled off three years ago,” Gandel reports. “It turns out that Cook threw his lot in with Apple shareholders at the exact right time, catching the stock at its low. Apple’s shares rose by 61% the next year, and by another 32% after that. The S&P 500—Cook’s bar to clear—rose just 21% and 4% respectively those next two years.”
“In the past week, a number of commentators have defended Cook’s enormous pay package. In the five years since Cook became Apple’s CEO, the company has brought in nearly $200 billion in cash flow, and based on that, his $373 million payday, or even $700 million, doesn’t look like so much,” Gandel reports. “But that cash flow wasn’t really generated by Cook. Nearly all of that comes from the iPhone, which was Steve Jobs’ creation.”
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MacDailyNews Take: CEO compensation, along with that of most of upper management, is obviously out of whack, but in order to retain quality people, you have to compete on the field of play as it is. What to do?
“There are creative ways — yet simple and easy to implement — to tie executives’ fortunes to the long-term health of their companies. Tying bosses’ pay to the levels of debt at the business, for instance, will dissuade them from taking risks that might alienate creditors,” Alex Edmans wrote for The Wall Street Journal in 2012. “Preventing executives from selling company stock until several years after it’s granted will give them a powerful incentive to think long term. And updating the compensation package to reflect changing conditions in the market and the company will ensure that managers’ interests are always aligned with those of the company and its shareholders.”
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SEE ALSO:
Apple’s Tim Cook reaped $373 million in stock in 60 months as CEO – August 25, 2016
Tim Cook set to receive over $100 million on 5th anniversary as Apple CEO – August 24, 2016