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Apple strips CEO Cook of $4M in stock grants for poor share performance

Gregg Keizer | Dec. 30, 2013
Apple CEO Tim Cook received a compensation package of $4.25 million for the 2013 fiscal year, a 2% increase over the year before.

Eighty-percent of the 1 million shares were covered by the new pay-on-performance deal, in which half of each year's vesting pool can be eliminated or reduced if Apple isn't in the top third of the S&P 500 as measured by the "total shareholder return" (TSR) metric.

TSR is a combination of share price appreciation and dividends paid to shareholders.

Because Apple's TSR was in the bottom third, Cook forfeited 7,123 shares, which were valued at $3.6 million on August 24, the day they were to vest. At Friday's closing price, the shares Cook lost would have been worth almost $4 million.

But no one should weep for Cook: The 72,877 shares that did vest on Aug. 24 were valued at $36.5 million at the time, and assuming he did not sell any, $40.8 million at Friday's closing.

So far, Cook's 2014 stock grant looks relatively safe, as Apple's TSR has kept pace with the S&P 500's. Since Aug. 25, 2013, Apple's TSR was +12%, while the S&P 500's average was +11.9%. Cook could still forfeit a quarter of the 80,000 shares slated to vest next August if Apple ends up in the middle third of the S&P 500, or 40,000 shares if the company lands in the bottom third.

Apple's shareholders will vote on several proposals at the February 28, 2014, meeting on the company's Cupertino, Calif. campus, including one submitted by trading activist Carl Icahn, who wants Apple to add $50 billion to its stock buyback program. Apple has recommended that shareholders reject the non-binding proposal.



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