Apple ties CEO bonus to stock performance

A new measure changes the rules for CEO bonuses, potentially limiting what Tim Cook can earn if Apple fares poorly.

Josh Lowensohn Former Senior Writer
Josh Lowensohn joined CNET in 2006 and now covers Apple. Before that, Josh wrote about everything from new Web start-ups, to remote-controlled robots that watch your house. Prior to joining CNET, Josh covered breaking video game news, as well as reviewing game software. His current console favorite is the Xbox 360.
Josh Lowensohn
2 min read
James Martin/CNET

Apple on Friday modified its CEO compensation policy, potentially trimming how much Tim Cook will earn in bonuses over the next few years based on Apple's stock price.

This measure was approved by Apple's board on Friday, the company said, while noting that CEO Tim Cook was applying it to his existing and future stock awards.

In Cook's case, he's got serious incentive to stick around with some 800,000 restricted stock units that are set to finish vesting in annual chunks of 80,000 through the fall of 2021. That reward was previously time-based, meaning that if Cook simply stayed on he'd receive the full amount, something that's no longer the case as part of the changes. Cook also won't receive more than the original amount if Apple performs better than expected, the company said.

In terms of how all this works out for Cook's bonuses, Apple (in its filing) said that it will track the company's performance based on stock price compared to others in the S&P 500, splitting it up into thirds. If Apple performs in the top third, any stock awards remain the same. But if Apple comes in the middle, the award gets cut by a quarter, and will be trimmed to by half if the company comes in on the bottom third.

Cook and other Apple executives received considerable bonuses in 2011 following leadership changes that came with the departure of Steve Jobs. That continued last September, with the company doling out what was worth more than $50 million in stock to executives, some of whom had been newly promoted as part of a reorganization.

Along with the change, Apple executives disposed of some $86.5 million in newly vested shares for tax purposes.

Correction at 3:35 p.m. PT: This story incorrectly accounted restricted stock payments of exercise price or tax liability as sales.