Apple chief executive officer Tim Cook is taking a 40% pay cut this year after taking feedback from the tech giant's shareholders.
Cook's 2023 target total compensation is $49 million, a reduction of more than 40% from his 2022 target total compensation, the iPhone maker says in a regulatory filing.
The Apple CEO's total target compensation stood at $84 million in 2022, although he received a salary of $99.4 million.
Apple's Compensation Committee, which reviews and approves the CEO's salary prior to the start of each fiscal year, balanced shareholder feedback, the company's performance, and a recommendation from Cook to adjust his compensation in light of the feedback received, the tech giant says.
Cook has a base salary of $3 million, which has remained the same since 2016. He is also eligible for an annual cash incentive or bonus of $6 million. The major difference in Cook's pay package this year comes from his equity award. In 2022, Cook was granted shares worth $75 million, half of which were based on how well the Apple stock performed. For 2023, his equity award target has been cut to $40 million, with 75% of it being dependent on Apple's share performance.
The percentage of performance-based restricted stock units (RSUs) granted to Cook have been increased from 50% to 75% of his 2023 target equity award and the percentage of his performance-based RSUs will be at least 75% of his target equity awards for future years, the company says.
The time-based RSUs awarded to Cook for 2023 provide for pro-rata instead of full vesting in the event of retirement during the term of the award, it adds.
Cook has served as Apple's CEO since 2011, having previously served as its chief operating officer from October 2005. The majority of Cook's compensation has been delivered through long-term equity awards since his promotion to CEO in 2011. "The equity awards he has received over time align with Apple's growth and success and the tremendous value delivered to our shareholders under his leadership. As of the end of 2022, Apple's Relative TSR (total shareholder return) increased approximately 1,212% during Mr. Cook's tenure as CEO, significantly outpacing the S&P 500 which increased approximately 290% over the same time period, and Apple's market capitalization grew by more than $2 trillion," the iPhone maker says.
Apple says it proactively engages with shareholders throughout the year to better understand their priorities and perspectives on significant issues, including company performance and strategy, executive compensation, corporate governance, shareholder proposals, and environmental and social matters.
"In the late summer and fall of 2022, we then engaged with shareholders owning approximately 56% of institutional shares held to follow up on the Compensation Committee’s decisions regarding executive compensation," says Apple.
This comes weeks after Google parent Alphabet approved a new pay structure for its chief executive Sundar Pichai, linking a larger chunk of his salary to the company's performance. "These changes further align Pichai's compensation to long-term shareholder value creation and Alphabet's stock performance relative to the S&P 100 over the applicable performance periods," Alphabet said last month. The proportion of performance stock units (PSUs) in Pichai's salary were increased to 60% from 43%.