Apple’s Tim Cook is taking a big pay cut, but don’t feel too bad for him

Jan 13 2023, 7:15 pm

Tim Cook, CEO of Apple Inc., will be taking a massive pay cut this year, according to a regulatory filing with the United States Securities and Exchange Commission.

Cook’s annual base pay as CEO has been US$3 million since 2016. For context, that’s just over $4 million Canadian.

Like most CEOs, the bulk of his compensation is made up of an annual cash incentive, which is 200% of his base salary, and a hefty equity award. Last year Cook’s equity award value stood at US$75 million with 50% performance-based vesting and 50% time-based vesting, and his annual cash incentive was US$6 million.

For 2023, his total target compensation is US$49 million ($65.7 million Canadian). While his base salary and annual cash incentive remained the same, his equity award will take a hit and be valued at US$40 million — 75% of it based on performance and 25% on time spent.

In a message to shareholders enclosed within the filing, Apple’s Compensation Committee outlined the reasons for cutting Cook’s pay.

“During 2022, we worked with management to expand shareholder engagement efforts to gather more information on shareholder perspectives with regard to our executive compensation program and, in particular, CEO pay,” the committee wrote. “Based on these important conversations, we have made changes to the size and structure of Tim’s 2023 compensation.”

In 2022, Apple reported record sales of US$394.3 billion ($528.31 billion Canadian) and record operating income of US$119.4 billion ($160 billion Canadian), with year-over-year increases of US$28.5 billion and US$10.5 billion, respectively.

“This also represented a year-over-year increase of 8% for net sales and 10% for operating income, which exceeded the maximum annual cash incentive plan goals for the year and resulted in the maximum payout of 200% of target for each of our named executive officers,” the filing reads.

Apple’s shareholders had requested more disclosure on its CEO’s compensation, and expressed “concern over the amount of Cook’s total target compensation as a result of the size of his 2021 and 2022 equity awards.”

They also said they preferred reduced equity award values for future annual grants, and wanted a higher percentage of Cook’s equity award to be performance-based.

“Mr. Cook’s 2023 target total compensation is US$49 million, a reduction of over 40% from his 2022 target total compensation,” the Compensation Committee wrote in their decision.

The committee also intends to position Cook’s annual target compensation between the 80th and 90th percentiles relative to Apple’s primary peer group for future years.

CEO pay in Canada

Earlier this month, the Canadian Centre for Policy Alternatives (CCPA) looked into Canada’s 100 highest-paid CEOs’ earnings in 2021 and determined that they made 243 times more money than the average worker at a whopping median value of $14.3 million per annum. The group is also “overwhelmingly male.”

In 2018, these CEOs earned 227 times more money than other Canadians. Back then, their average salary was $11.8 million per year.

“If you measure this massive pay disparity in time, less than an hour after the first working day of the year begins, Canada’s highest-paid CEOs will have already made $58,800 or what it will take the average worker the entire year to make,” revealed CCPA Senior Economist David Macdonald. “That’s by 9:43 am on January 3, 2023, to be precise. You could call the CEO to pay the breakfast of champions.”

Inflation has always boosted corporate profits, leading to bigger executive bonuses. The CCPA determined that these bonuses made up the bigger portion of the highest-paid CEOs’ total compensation — a startling 83%.

“We think of inflation as bad for everyone, but for CEOs, it’s the gift that keeps on giving,” Macdonald shared. “When times are bad, like during the pandemic, CEO bonus formulas are altered to protect them; in good times, like 2021, the champagne never runs dry.”

What are your thoughts on Tim Cook’s pay cut and the general state of sky-high CEO compensations in North America? Let us know in the comments.

Imaan SheikhImaan Sheikh

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