Apple today published its annual proxy statement for investors, revealing a number of details about executive compensation, shareholder proposals, and more. This year, the filing has revealed that Tim Cook will take a significant pay cut in 2023 after he himself suggested that his compensation be adjusted in light of feedback.
In today’s filing, Apple explains that Tim Cook will have a “target compensation of $49 million” in 2023, a decline of around 40% compared to what he earned in 2022:
Mr. Cook’s 2023 target total compensation is $49 million, a reduction of over 40% from his 2022 target total compensation. Taking into consideration Apple’s comparative size, scope, and performance, the Compensation Committee also intends to position Mr. Cook’s annual target compensation between the 80th and 90th percentiles relative to our primary peer group for future years.
Here’s why Tim Cook is taking a ~$50 million pay cut
Apple’s board of directors has a Compensation Committee that oversees things like executive compensation. According to today’s filing, Cook himself recommended that his compensation structure be adjusted based on feedback received as part of the Compensation Committee’s “Say on Pay” survey and vote.
The Compensation Committee evaluates and makes compensation decisions prior to the start of each fiscal year. The results of the 2022 Say on Pay advisory vote led to broader shareholder engagement on executive compensation in 2022 of approximately 53% of institutional shares held. The Compensation Committee balanced shareholder feedback, Apple’s exceptional performance, and a recommendation from Mr. Cook to adjust his compensation in light of the feedback received.
Essentially, the “Say on Pay” advisory vote results in 2022 revealed that support for Apple’s executive compensation in 2021 had declined significantly compared to previous years. In 2021, Tim Cook received total compensation of around $98 million. Sixty-four percent of votes cast at the next year’s shareholders meeting were in favor of the 2021 compensation paid to executives.
The results of that vote represented a “notable year-over-year decline” from the results the previous year, when 94.9% of shareholders surveyed supported the executive compensation proposal.
Given that, the Compensation Committee – with support from Tim Cook – set out to explore more feedback and consider changes for executive compensation in 2023.
From today’s filling:
In determining the appropriate amount of each compensation component for 2022, the Compensation Committee discussed numerous factors with the Board and its independent compensation consultant, including Mr. Cook’s outstanding leadership, the immense scope and complexity of his role as Apple’s CEO, the Board’s confidence in his long-term strategic decisions, the Company’s exceptional financial results delivered during 2021, shareholder feedback, and the value of his prior equity awards as compared to the value of his current outstanding equity awards.
Balancing shareholder feedback, a desire to continue to create meaningful performance and retention incentives, and Mr. Cook’s support for changes to his compensation to reflect the feedback received, the Compensation Committee maintained the cash components of Mr. Cook’s 2023 compensation and reduced his target equity award grant value.
With these changes for 2023, here’s the breakdown of how Tim Cook will be paid in 2023, equaling out to a total compensation target of $49 million (down from the $84 million target of 2022):
- Base salary: $3 million (No change)
- Annual Cash Incentive: $6 million (No change)
- Equity Award Value: $40 million
- Down from $75 million in 2022
- In 2022: 50% performance-based vesting and 50% time-based vesting
- In 2023: 75% performance-based vesting and 25% time-based vesting
One thing to note is that Cook’s target compensation was $84 million for 2022, but he actually made around $99.4 million given that much of his compensation is performance-based and tied to Apple’s stock.
In a 2015 interview, Cook said he plans to give away all of his wealth through a “systematic approach” to giving. At the time, he said he had started donating money “quietly” but did not reveal details.
Tim Cook’s private jet costs
Apple’s board of directors implemented a policy in 2017 that requires Cook to use a private jet for all of his business and personal travel for “security and efficiency reasons.” Since that policy as implemented, people love to know how much Apple spends on Cook’s use of a private jet and security costs.
For 2022, Apple says that it spent $591,196 in security expenses for Tim Cook, representing the “incremental cost to Apple for personal security services provided to Mr. Cook as determined by allocating both direct costs and a percentage of fixed costs incurred by Apple and used to provide such personal security services.”
As for the private jet, Apple says it spent $767,319 on air travel expenses for Cook. This includes Cook’s personal use of private aircraft based on hourly flight charges and other variable costs incurred by Apple for such use, including variable fuel charges, departure fees, and landing fees.
The full filing is below.
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