Apple ties CEO's pay to company's fortunes

Apple gave CEO Tim Cook a 55% salary increase for 2012 and awarded him a $2.8 million bonus but said his overall compensation for the year was still down by 99% compared with 2011 levels.

In fact, Apple said, Cook's pay is "significantly below the median" level of compensation for top executives at comparable companies.

But even taking into account Apple's size and its high-revenue year, Cook's pay was certainly adequate, said Don Lindner, executive compensation practice leader at WorldatWork, an association for human resources professionals. "The single biggest factor in executive pay is the size of the company, and Apple obviously is huge," he said. "But Cook has not been in the job very long. It may take a period of years for him to be paid at the median."

Cook's 2011 package total was skewed, however, by a massive grant of 1 million Apple shares, worth $376 million of the $378 million total package. Those shares are now worth over $532 million at today's prices, but the shares vest in equal parts in 2016 and 2021, assuming Cook is still with the company.

"There was no competitive reason" for awarding more stock to Cook this year, said Bob Buford, a compensation consultant. "They're already married to the guy for 10 years."

Apple guidelines put in place after the death of Steve Jobs require the CEO to own shares of company stock with a value equal to 10 times the base salary. The idea is to keep the top executive at Apple, working for the long-term success of the company, by tying his fortunes at least in part to the company's.

Jobs owned approximately 5.5 million shares of Apple stock at the end of 2011.

"Shareholders like to see that senior management has skin in the game," Lindner said. That said, 10 times base salary is "very high," he continued. Noting that the typical rate is five times base salary, he added, "Apple is making a big statement here."

This version of this story was originally published in Computerworld's print edition. It was adapted from an article that appeared earlier on Computerworld.com.

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