March 15, 2005 9:42 AM PST
Apple execs underpaid, board says
In its annual proxy statement, Apple said on Tuesday that infrequent grants of stock are not enough to make up for regular cash and stock-based bonuses, and it called on shareholders to approve a cash bonus program.
Last year, Apple's executives, with the exception of CEO Steve Jobs, received significant pay packages thanks to grants of restricted stock. Jobs received only his $1 salary and no stock grant, after receiving restricted stock worth nearly $75 million during the prior year.
Executive Vice President Tim Cook received a salary of just more than $600,000 and restricted stock worth $7.65 million. Senior Vice President of Retail Ron Johnson and iPod unit head Jon Rubinstein each received roughly $485,000 in salary and restricted stock worth $6.38 million. Chief Software Technology Officer Avie Tevanian received a nearly $470,000 salary and restricted stock worth $5.1 million. The value of the stock grants is as listed on March 24, when they were awarded, and the grants generally vest over four years, Apple said.
Three of the four executives also made a combined $50 million by cashing in previously awarded stock options. Rubinstein took home $26.4 million, Cook received $14.7 million and Tevanian garnered $8.8 million.
But Apple said the company needs to do more to retain top employees and called on shareholders to approve both the bonus program and an expansion of its employee stock option program.
"The ability to grant equity awards is a necessary and powerful recruiting and retention tool for the company to obtain the quality employees it needs to move its business forward," Apple said in support of the plan.
Under the cash bonus proposal, the board's compensation committee would establish the means for determining bonuses. These could be based on a number of factors, including the company's revenue, cash holdings, income, cash flow, return on assets, return on equity, total shareholder return or individual performance objectives.
Meanwhile, a separate shareholder proposal calls on the company to focus on restricted stock that vests over several years as a means of compensating executives for long-term performance. Apple's board is opposing that proposal, which was put forth by a metal workers' pension plan.
Apple has been on a roll, thanks in large part to the success of the iPod digital music player. The company recorded record sales and earnings for the December quarter, and its stock has been on a tear. Shares have nearly quadrupled in the past year, prompting the company to declare a two-for-one stock split in February.
The company hired a consultant to examine its pay practices last year. Apple said that while base salaries and stock grants were at or above the median for similar companies, the absence of a cash bonus program left the company's executive vice president and senior vice presidents with a cash compensation program that "is not competitive."
"The infrequent grant of stock options and/or other equity awards is insufficient to make up for the less-than-competitive total cash compensation paid to executive officers," Apple said in summarizing the consultant's findings.
Shareholders will vote on the various proposals and be asked to approve the company's slate of directors at Apple's annual meeting on April 21.
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