
Apple Awards Tim Cook 1,000,000 Shares of Stock as CEO Bonus to Stay Until 2021 - sahillavingia
http://www.macrumors.com/2011/08/26/apple-awards-tim-cook-1000000-shares-of-stock-as-ceo-bonus/
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RockyMcNuts
It's the principal-agent problem - <http://en.wikipedia.org/wiki/Principal-
agent_problem>

You could find a lot of capable people willing to do the job for a lot less.

But if you pay them a fixed salary, even $1m, that isn't directly linked to
the performance you're looking for, then the game is to avoid anything too
risky, even if the expected value is very high, if it might endanger the CEO's
job. The game would be to take the minimum risk and do well enough to not get
fired, and that's it.

If Tim Cook manages to double the stock price, he'll have $700m. If it drops
to $100, he'll have $100m. It's a big difference, and his interests and risks
are aligned with the shareholders.

Anyway, that's the theory. Give too much stock, and you're impoverishing the
shareholders for little benefit. Don't give enough, and a superstar might
decide he'd rather do a startup or an incubator LOL, or he may not want to
pursue the same kind of risk-reward as the people who hire him.

$100m is still a great deal of money. I guess going to $700m, it's the
difference between superrich for life, and a legacy of being a great leader
and dynastic wealth LOL. Nice work if you can get it.

~~~
eneveu
What does "LOL" mean in this context?

I've googled it, but it's hard to find the appropriate meaning, since search
results seem to focus on the "laughing out loud" sense... "Limit of Liability"
was the closest meaning I could find on the Wikipedia disambiguation page (
<http://en.wikipedia.org/wiki/LOL_(disambiguation)> ), but it doesn't seem to
fit in this context.

~~~
sneak
Best translation I can think of: "ha ha only serious"

He is using it as the word that the Laughing Out Loud initialism became, which
has slightly different usage and meaning. (e.g. in the common phrase "I did it
for the lulz.")

~~~
eneveu
Oh ok. I'm not a native English speaker, and I thought from the context that
it was an abbreviation related to business / investing which I didn't know
about. Thanks!

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jmspring
I'm sorry, but the comments on here stating "$58m is more than enough to
retire upon" are naive when talking about the CEO of one of the largest
(market cap) corporations in the world.

Is it a lot overall? Yes. Is it comparable to the same position in similar
companies? Probably, I haven't done the comparison. I know a lot of banking
CEOs have been making much more for nearly wrecking the economy.

I generally think the C-class officers to average employee salary is way out
of whack. But, I think, given the job Tim Cook has been doing and the
contribution to the valley and economy that has resulted due to Apple's
success, I feel is is more than merited this generous plan.

If Apple were bleeding or just average? That would be one thing, they have
been running on all cylinders and Tim Cook has been instrumental in that.

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jrockway
Wow, 58 million dollars a year. What's the incentive to work for more than one
year?

58 million dollars is more than I'll ever make in my entire life.

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philwelch
Normal people would just take 58 million dollars for the first year and
retire. Then again, normal people don't earn 58 million dollars a year.

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mynegation
I somewhere read that Tim Cook's salary was 800K and though - wow that's
really not that much for a COO (and CEO-to-be) of the biggest corporation (by
market cap) in the world. But then I found that total comp is more like 60M
(<http://people.forbes.com/profile/timothy-d-cook/6607>) which looks more like
I though it should be.

My point being, in 2010 Tim Cook already got 52M of restricted stock awards,
so this number spread out through the years is nothing out of ordinary for
him.

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kingkawn
"which looks more like I though it should be."

Did you mean should? Or would?

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benatkin
Why shouldn't it be _should_? He's done an amazing job and deserves to be
compensated fairly. At the scale Apple's at, the number will be huge to most.

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sparky
That's the parent's point.

"More than I thought it _would_ be" connotes that he was surprised.

"More than I thought it _should_ be" connotes that he thinks it's too much.

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alextgordon
"More _like_ I thought it should be"

Not "more _than_ ".

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sparky
You're right, my mistake. Rest assured that the irony here does not escape me
:)

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djcapelis
The more important the person, the bigger the golden handcuffs need to be.

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Bud
Add this amount ($380 million or so at current Apple stock price) to the
extrapolated salary for Cook over the next decade, and he will earn right
around an even billion dollars in the next 10 years.

Nice work, if you can get it!

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Game_Ender
Not sure he will be getting this every year. The first 50% vests in 5 years
and the next 50% vests 5 years after. This seems like a large deferred bonus
to encourage Cook to maintain or increase the stock price for the long term.

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mikehotel
I read that as the 380 million in 10 years deferred CEO bonus, in addition to
his current 60 million/year total compensation, would total to around 1
billion at the end of 10 years. I'm going to go out on a limb and guess it
will be well north of 1 billion, once stock price appreciation is accounted
for. Hope he considers taking the <http://givingpledge.org/> :)

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veyron
If Tim Cook and Apple without Steve Jobs can continue innovating at the same
pace, shareholders will see it as a small investment in Apple's future. And it
seems like this was geared to appease the markets.

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URSpider94
Folks seem to be mentally linking this news to Warren Buffett's comments about
income tax disparity. Keep in mind that RSU's are taxed as earned income,
valued on the day that they vest. Any appreciation above and beyond that would
indeed be taxed at capital gains rates (15% if held longer than a year after
vesting), but the core value will be taxed at his marginal rate of 35%.

Buffett's tax rate hovers around 15%, because the lion's share of his income
comes from cap gains and qualified dividends. Cook will be paying more than
double that on his income from this deal.

~~~
jonknee
If the shares don't change in value, that will be an approximately $67M tax
bill (vs $28M if it were taxed at 15%). A good problem to have I suppose.

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Jayasimhan
"In contrast, Steve Jobs earned a $1 annual salary every year since he
rejoined Apple in 1997. While many $1-a-year CEOs reap big back-end stock and
options packages, Jobs was almost a financial ascetic: He collected no stock
awards most years, no cash bonuses and no perks, even turning down a 401(k)
match from Apple."

From
[http://money.cnn.com/2011/08/26/technology/tim_cook_stock_bo...](http://money.cnn.com/2011/08/26/technology/tim_cook_stock_bonus/index.htm?source=cnn_bin&hpt=hp_bn3)

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justincormack
Apart from the 10 million share options he got that the article mentions...

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daimyoyo
I'm not sure it bodes well for Apple that the board feels like it has to
incentivize Tim Cook with golden handcuffs. They gave Steve a lot in terms of
stocks and gifts(like the free plane for example) but I can't ever rememberer
him getting restricted stock to remain with Apple(except perhaps when he first
came back and the company was on the verge of insolvency). Just having the
ability to lead Apple always seemed like incentive enough for him.

~~~
mrkurt
They probably feel the need to demonstrate the incentives to the investors,
not the guy who's been at Apple for the last 13 years.

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jbrennan
I wonder if he too will adopt the $1/year salary Jobs was known for?

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jellicle
Is Tim Cook really worth as much as 580 regular Apple employees? Really?

Tim Cook alone is taking home 5% of all the money Apple spends on employee
compensation worldwide. If you cut down Cook's compensation a little bit,
everyone else at Apple could get a couple percent raise.

Which one would REALLY be better for the company: paying every single Apple
employee a couple percent more enabling Apple to hire better people across the
board, or paying it all to the CEO?

People need to recognize how grotesque it is that you have a CEO making
$160,000 per day, every day.

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aaronbrethorst
> People need to recognize how grotesque it is that you have a CEO making
> $160,000 per day, every day.

People need to recognize how grotesque it is that you have a CEO barely being
taxed on their income compared to what they would've been taxed during the
greatest economic boom of the past twenty years.

I'm an AAPL shareholder, and I support the board's largesse. Pay him more for
all I care, as long as he delivers and my stock appreciates. I would _love_ it
if the US government would, relative to the current situation, tax the shit
out of me and Tim, both.

> enabling Apple to hire better people across the board

I'll make an assertion of my own: I don't think this is true for a second.

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egiva
Totally agree. I'm guessing that those options are spread over the 10 years,
so we're talking roughly $37m a year if the stock remains at the same price.
It's just paper money until those options become liquid, and he's working at a
big discount when compared to Jobs' 5.5+ million shares from 1997 until today
(14 years).

So yeah, taking into consideration that Apple is suddenly working with a CEO
that arguably requires less compensation than Jobs, my issue isn't with the
amount, but rather how he's taxed and more broadly, the large divide between
the top income tax bracket (35%+) and capital gains (15%) which is really
terrible, considering that it consitutes an enormous tax loophole for people
who earn their income via investments, rather than a traditional wage.

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MaysonL
They're not options, they're stock grants, which vest at 5 and 10 years.

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egiva
Good point, but the issue still stands - it's less stock per year than Jobs'
compensation, not taking into account any other standard compensation that
Cook will receive. My understanding of a grant is that the stock can be vested
or restricted, although I assume that after a 5-year wait it will be vested
when Cook receives it, so he'll owe taxes on it.

That's probably why a 5-year period also favors Cook because Apple will be
required to withhold tax on the market value of the stock, and it's tricky how
that withholding is paid - for cash grants they withhold a percentage of that
sum to satisfy the estimated tax, but unfortunately for stock grants,
sometimes the grantee is required to pay that estimated withholding to his/her
company if they don't have enough cash compensation to offset it. I'm
interested to hear how Cook gets around that $100m+ tax liability, but he has
5 years to prepare.

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ck2
He can live off the dividends after that and only pay 15% taxes too.

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gnok
Sort of hard to do, if your stock doesn't actually pay any dividend.

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blantonl
many Apple shareholders would agree wholeheartedly with this statement.

With that said, all that cash they are sitting on is really interesting,
considering they've been hoarding it for a while. Jobs was criticized for this
in the financial arena, but his position always referred back to the days when
Apple almost went down the drain. That has made them ultra-conservative from a
financial perspective.

