Tim Cook Gets $22 Million for Filling Steve Jobs’s Shoes
Those of us who have had regular jobs know the joy of the bonus, a reward for working hard and producing results. Apple Chief Operating Officer Tim Cook found a little something extra in his pay envelope on 10 March 2010: $5 million plus 75,000 restricted shares of stock worth $17 million at today’s prices.
Cook was rewarded for “outstanding performance in assuming the day-to-day operations of the Company for the period in fiscal 2009 during which Mr. Jobs was on medical leave of absence,” according to an SEC filing by Apple. The stock grants are in two even pieces that can’t be sold for one and two years as long as Cook is still employed on those dates.
Many executives at companies large and small are compensated far beyond the value to investors. I’m a great fan of Nell Minow, who has for the last 11 years documented at Corporate Library excessive and secret corporate payouts to underperforming leaders.
But Cook seems to deserve this one (I’m not a shareholder, and so the disbursement doesn’t affect me directly). Cook was in charge of Apple for the first half of 2009, and the company didn’t appear to suffer at all, despite handwringing by pundits who thought Jobs had the golden product-laying goose in his carry-on luggage.
The stock was around $100 per share near the end of 2008 and into 2009; it closed at $224.84 on the day Cook’s shares were awarded. Company revenue and earnings were remarkable in the fiscal quarter ending in January 2010 (which included the holiday season). Apple increased revenue 32 percent over the year-ago quarter, and profit was up 50 percent. Apple has $40 billion in cash and short-term investments.
The company’s market capitalization – stock price multiplied by shares outstanding – is over $200 billion, which means shareholders’ stake in the firm has grown by about $115 billion in the last 14 months. Cook’s bonus is two-hundredths of one percent of that increase.
The restricted stock is also a tiny set of handcuffs to keep Cook at the company, and could be worth much more than the $17 million the shares would sell for today. Two years ago, Cook exercised 300,000 options and sold them for around $140 per share, reaping about $40 million. Records show he retained just 14,000 shares in the company before this new, restricted grant.
I'm no critic of Tim Cook's performance, but I think our whole executive pay structure is skewed. Tim Cook's $19 million is a BONUS on top of what may already be a multi-million dollar salary.
I'm glad Cook did a fine gig for standing in for Steve Jobs. It's better than many CEOs who seem to earn multi-million dollar bonuses for being fired. But, that is still quite a wad of bills.
I sometimes wonder what companies could save if we farmed out some of these jobs to India.
This is an extraordinary event, one that most companies will never achieve, and the bonus is structured as both a thank you and a tool for retention.
I think stock options would be a more appropriate gift than reserved stock, in that options (while they represent an expense to stockholders) reward only further improvements instead of being an outright grant.
Just to keep the arithmetic accurate, the bonus is actually only two *hundredths* of one percent of the increase in capitalization.
Thank you for catching that. It's now fixed.
I question your lede,"Those of us who have had regular jobs know the joy of the bonus, a reward for working hard and producing results."
I'd argue that only a tiny portion of both salaried and hourly labor, including executives and professionals, know the joy of a bonus. I'm not talking a nominal three figure Christmas gift, and you're not either. I'm talking a bonus that exceeds a significant percentage of base salary.
I'd argue only the top 1% or less of American workers knows the joy of a real bonus. Often it's just the C-level managers. And often, like here, it can be the result of short-term pumping of the stock price by accounting gimmicks and layoffs.
I'd agree with David Weintraub that we'd all be better off and more productive if the labors of all workers were reflected in their bonuses and pay rather than being skimmed off for the top of the pyramid.
The only joy most workers share in Mr. Cooks success is not being laid off and having their jobs offshored to China.
I'm using a bit of sarcasm to relate the bonus that most people see (tiny, if at all, but often welcome) with the massive disgorgement, however justified, that Cook received.
Overall, I support salary equity, with a relatively small spread between people earning a living wage with pension, health care, and sick leave at the bottom; and people earning a decent return based on their value to shareholders on the top.
Well $22M is 440 x $50K. So Apple could employ 440 people for a year on $50K.
Rewards are one thing but that's a pretty obscene amount of money.
I am a dyed-in-the-wool Apple fan and I realise Tim Cook wouldn't be doing it for nothing, and he needs to be rewarded for performance.
I think Obama's initiative to rein-in these excessive rewards is correct and needs to be supported.