updated 08:00 pm EDT, Fri June 21, 2013
Voluntarily ties stock awards to company performance
Despite signs of a weakening stock market and a company stock that is less than $30 away from its 52-week low, a group of Apple senior executives -- including CEO Tim Cook -- opted to sell restricted stock unit (RSU) bonus awards they received two years ago that recently vested. On average, five of the six leaders grossed about $15 million, with Senior Vice President of Technologies Bob Mansfield selling less stock and gaining about $6 million for a grand total among the group of $86.45 million. In addition, Cook asked the board to tie his RSUs more closely to company performance.
Under the arrangement Cook asked for, the one million RSUs awarded to him when he became the permanent CEO of Apple in August of 2011 would change from being broken into two awards (once every five years) into a total of 10 awards, granted roughly yearly. As before, should Cook leave Apple he would forfeit the remaining RSUs, but in the previous arrangement that was the only condition on the RSUs. In the new deal, Cook is granted a smaller number of shares more frequently -- but the number of shares awarded will be tied to how well the company is doing in the market, meaning Cook would forfeit some shares if the company does poorly.
Under the original arrangement, Cook was to have received 500,000 RSUs in 2016 (his fifth anniversary of being CEO) and another 500,000 in 2021 (the tenth anniversary), The new deal offers Cook about 80,000 shares every year starting this year, with 100,000 more on the fifth and tenth anniversaries -- working out to the same number of shares overall. The wrinkle in the arrangement is that Cook will only get 100 percent of the shares fully vested if the company is in the top third of S&P 500 companies in terms of total shareholder return. If Apple is in the middle third, Cook will get half of his annual shares vested, and if it is in the bottom third he will get none of the RSU shares.
At present, Cook's 1 million RSU compensation package is worth about $413 million, a theoretical loss of over $300 million from the stock's all-time high last seen in late September of last year (though it is still up in value from when he was awarded it in 2011). As Cook's full award doesn't vest for another eight years, it's impossible to say what the actual value of it will be. The current drop in AAPL is seen as less having to do with any internal Apple factors and more about the market generally: NASDAQ has dropped 3.38 percent in the last three days.
Cook, along with Phil Schiller, Operations head Jeff Williams, Legal Counsel Bruce Sewell and CFO Peter Oppenheimer, redeemed RSUs awarded two years ago that vested on Friday, roughly half of an award that will vest again in 2016 (contingent on performance and continued employment by that date, notes AppleInsider). Cook grossed about $17.1 million, Schiller $16.3 million, Williams around $15.8 million, and Oppenhemier and Sewell getting $15.6 million each.