We all look forward to that annual holiday bonus but, when it goes too far beyond what is customary, it can become the cause of both internal and external contention. Take Apple (AAPL) - Get Apple Inc. Report, where a top shareholder advisory group is urging investors to vote against the $99 million pay and bonus package for chief executive Tim Cook at next month's annual meeting.
The CEOs Earned How Much?!
A proxy advisory firm on all things having to do with responsible governance, Institutional Shareholder Services urged its clients to vote down the generous package that Cook received for his compensation in 2021.
In a client letter reported by the Financial Times, the advisory group said that there is "a significant concern" over the $82 million in stock awards that Cook received as part of his compensation. The package also included a $3 million salary, a $12 million cash bonus and just under $1.5 million in personal security and private jet costs for a grand total of $98.7 million.
The more-than-generous compensation reflects not only Apple's size and success (shares rose by 31.88% in the last year) but also Cook's 10-year anniversary at the helm of the company after taking over following Steve Jobs' death. While not commenting on this specific ISS recommendation, Apple has previously named Cook's leadership as what helped it briefly reach a market cap of $3 trillion in January and become the first company in the U.S. to do so. In fact, more than 90% of Apple's market cap has come during Cook's tenure. The stock was $13.34 when he took over in August 2011. It closed Wednesday at $172.55.
"The structure of this award is better aligned with the performance-based and time-based RSUs awarded to our other named executive officers, while the amount recognizes his exceptional leadership and is commensurate with the size, performance, and profitability Apple has achieved during his tenure," Apple said in a statement when Cook's compensation was made public at the start of 2021.
For comparison, Microsoft (MSFT) - Get Microsoft Corporation Report CEO Satya Nadella's compensation rose from $44.3 million to $49.9 million in 2021 while the new Amazon (AMZN) - Get Amazon.com Inc. Report CEO Andy Jassy is slated to receive over $200 million in stock over the next 10 years.
Will This Become An Issue For Shareholders?
The last time the ISS took issue with Cook's pay was in 2015 over a compensation total of $10,281,327. According to an annual Executive Paywatch report, CEOs of S&P 500 companies saw their pay rise by an average of $712,720 in 2020 — a situation that caused outcry about increasing inequality among some members of the general public.
Much of the latest concern is symbolic as, even if shareholders decide to vote against Cook's compensation, the ultimate decision rests with Apple's board. The board is not obligated to respond to shareholders' concerns but, in the interest of avoiding backlash and negative PR, may choose to do so.
Last year, more than 50% of AT&T (T) - Get AT&T Inc. Report shareholders voted against approving executive compensation. In the same year, Starbucks (SBUX) - Get Starbucks Corporation Report shareholders also voted down an executive compensation plan that included a $1.86 million bonus award to chief executive Kevin Johnson.
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