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Apple (AAPL) CFO Oppenheimer Compensated 16x More than CEO Cook in FY12

December 27, 2012 6:30 AM EST Send to a Friend
Apple (Nasdaq: AAPL) filed a preliminary proxy with the U.S. SEC today (Form PRE 14A). The following is a summary of highlights leading to compensation awards for executives. Notably, CFO Peter Oppenheimer was compensated over 16 times more than CEO Tim Cook in 2012 (for the breakdown, skip to the bottom).

Highlights of the Company’s executive compensation program include the following:
  • The Compensation Committee granted regular RSU awards to members of the executive team, other than Mr. Cook, in November 2011. This is consistent with the Company’s recent practice of granting regular RSU awards to the named executive officers (other than the CEO) approximately every two fiscal years. Messrs. Oppenheimer, Mansfield, Sewell, and Williams each received 150,000 RSUs. Fifty percent (50%) of the awards are scheduled to vest in June 2013 and fifty percent (50%) of the awards are scheduled to vest in March 2016, subject to each officer’s continued employment with the Company through the applicable vesting dates.

  • Mr. Cook did not receive an RSU award in 2012 in light of the RSU award he received in connection with his promotion to CEO in August 2011.

  • Following a recommendation by Mr. Cook to the Compensation Committee, the Company adopted stock ownership guidelines for the CEO and the Non-Employee Directors. Under the guidelines, Mr. Cook is expected to own shares of Company common stock that have a value equal to ten times his base salary.

  • The base salaries and bonus opportunities for each of the named executive officers were increased for 2012 based on competitive market data, internal equity considerations, and the Compensation Committee’s assessment of the Company’s performance. Mr. Cook’s base salary was increased to $1,400,000 and the base salaries of Messrs. Oppenheimer, Mansfield, Sewell and Williams were increased to $800,000. The target and maximum bonus opportunities for each named executive officer were increased to 100% and 200%, respectively, of the officer’s base salary. The changes generally have the effect of positioning target annual cash compensation for the named executive officers, other than Mr. Cook, at approximately the median for executives at peer companies. Mr. Cook’s target cash compensation remains significantly below the median for CEOs of peer companies.

  • The Company exceeded the maximum performance goals for both net sales and operating income set by the Compensation Committee for 2012. Accordingly, each executive officer received the maximum payout of 200% of base salary under the performance-based bonus plan.

  • Texas Instruments was removed and DIRECTV and Viacom were added to the primary peer group used for compensation comparison purposes. The Compensation Committee also established a secondary peer group of general industry mega-cap companies to provide a broader perspective on pay levels and practices for companies of comparable size.

  • The Company authorized a dividend program in 2012. In connection with this program, all outstanding and unvested RSU awards granted to employees, other than the RSU awards held by Mr. Cook, were modified to allow dividend equivalents to accrue on unvested RSUs in order to maintain the economic alignment between the value of an RSU and the value of a share of Company common stock. Upon payment of a dividend by the Company to its shareholders, an employee with an outstanding RSU award is credited with a dollar amount equal to the dividend that would have been paid if the shares subject to that award were vested shares of common stock rather than unvested RSUs. These “dividend equivalents” are paid to an employee only if and when the underlying RSUs vest. Mr. Cook requested that none of his RSU awards be modified to participate in dividend equivalents.

Determining Compensation for the Chief Executive Officer

* Mr. Cook was promoted to CEO in August 2011. At that time, the Board granted Mr. Cook 1,000,000 RSUs as a promotion and retention award. Fifty percent (50%) of Mr. Cook’s award is scheduled to vest on August 24, 2016 (five years after the award date) and fifty percent (50%) of Mr. Cook’s award is scheduled to vest on August 24, 2021 (ten years after the award date), subject to Mr. Cook’s continued employment with the Company through the applicable vesting dates. In light of the RSU award granted to Mr. Cook in connection with his promotion to CEO, the Compensation Committee did not grant Mr. Cook an RSU award in 2012.

* Mr. Cook did not participate in the Compensation Committee or the Board’s deliberations or decisions with regard to his own compensation. However, in modifying the Company’s RSU awards to allow dividend equivalents to accrue on outstanding RSUs held by the Company’s employees generally, the Compensation Committee considered Mr. Cook’s request that none of his RSU awards be modified to participate in dividend equivalents. As of May 24, 2012, the date the Committee modified the Company’s outstanding RSU awards, Mr. Cook held 1,125,000 unvested RSUs. Assuming a quarterly dividend of $2.65 per share over the vesting periods of his RSUs, Mr. Cook will forgo approximately $75 million in dividend equivalent value that would have otherwise been paid to him if and when his RSUs vested.

* Mr. Cook also recommended to the Compensation Committee that the Company adopt stock ownership guidelines for the CEO and the Non-Employee Directors. The stock ownership guidelines were reviewed and approved by the Compensation Committee, and subsequently adopted by the Company. Under the guidelines, Mr. Cook is expected to own shares of Company common stock that have a value equal to ten times his base salary. Non-Employee Directors are expected to own shares of Company common stock that have a value equal to five times their annual cash retainer for serving as a director. Shares must be owned directly by the individual acquired through open market purchases or upon the vesting of RSU awards, or owned jointly with or separately by the individual’s spouse, or held in trust for the benefit of the individual, the individual’s spouse or children. Each individual is expected to satisfy the applicable stock ownership guideline within five years.

* In November 2011, the Compensation Committee determined that it was appropriate to increase Mr. Cook’s base salary to $1,400,000 from $900,000. Mr. Cook’s cash compensation is set at a higher level than the cash compensation for the other members of the executive team to reflect his responsibilities for the overall leadership of the Company. Mr. Cook participates in the same performance-based bonus program as the other named executive officers and has the same target and maximum bonus opportunities of 100% and 200%, respectively, of his base salary.

* In deciding to increase the cash compensation for Mr. Cook, the Compensation Committee considered the Company’s financial results, Mr. Cook’s responsibilities as CEO, and his total cash compensation opportunities as compared to the total cash compensation opportunities of the other named executive officers as well as the total cash compensation opportunities of CEOs at peer companies. Despite this increase, the target annual cash compensation for Mr. Cook remains significantly below the median annual cash compensation level for CEOs at peer companies.

SUMMARY
In total, Cook's compensation in FY12 according to SEC rules was $4.17 million. The number consisted of $1.358 million base salary, $2.8 million in non-equity incentive compensation, and $17,274 in other compensation.

CFO Peter Oppenheimer's compensation under the same rules was $68.59 million. The number was from $805,400 base salary, $66.17 million in stock awards, $1.6 million in non-equity incentive compensation, and $16,412 in other compensation.




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