Apple released its annual proxy statement to investors today, revealing a number of details about executive compensation, shareholder proposals, and more. Now it has been revealed that Tim Cook will take a significant pay cut in 2023 after he himself suggested that his compensation should be adjusted based on feedback.
In today’s report explained Apple said Tim Cook will receive “target compensation of $49 million” in 2023, a decrease of about 40 percent from his 2022 salary:
Mr. Cook's target total compensation for 2023 is $49 million, a decrease of over $40 million from his target total compensation for 2022. In addition, taking into account Apple's comparable size, reach, and performance, the Compensation Committee intends to increase Mr. Cook's annual target compensation between his 80th and 90th years of service.
Why Tim Cook has to accept a $50 million pay cut
Apple's board of directors has a compensation committee that oversees executive pay, among other things. According to today's report, Cook himself recommended adjusting his compensation structure based on feedback he received from the compensation committee's "Say on Pay" survey and vote.
The Compensation Committee evaluates and decides on compensation before the start of each fiscal year. The results of the 2022 Say-on-Pay vote resulted in broader shareholder participation in executive compensation in 2022, which held approximately 53% of institutional shares. The Compensation Committee considered shareholder feedback, Apple's exceptional performance, and Mr. Cook's recommendation to adjust his compensation in light of the feedback received.
Essentially, the results of the 2022 Say on Pay vote showed that support for Apple executive compensation in 2021 had declined significantly compared to previous years. In 2021, Tim Cook received total compensation of approximately $98 million. Sixty-four percent of votes cast at next year's shareholder meeting were in favor of the compensation paid to executives in 2021. The result of that vote was a "notable decline" from last year, when 94.9% of shareholders surveyed supported the executive compensation proposal. In light of this, the Compensation Committee - with the support of Tim Cook - has set out to gather further feedback and consider changes to executive compensation in 2023.
Tim Cook's total compensation target in 2023
After considering shareholder feedback, the desire to continue to provide meaningful performance and retention incentives, and Mr. Cook's support for changes to his compensation that reflect the feedback received, the Compensation Committee maintained the cash components of Mr. Cook's compensation for 2023 and reduced the target value of his equity awards.
With these changes for 2023, Tim Cook's compensation breakdown in 2023 is as follows, resulting in a total compensation target of $49 million (up from $84 million in 2022):
- Base salary: $3 million (no change)
- Annual Cash Incentive: USD 6 million (no change)
- Value of share grant: USD 40 million (USD 75 million in 2022)
- In 2022: 50% performance-related and 50% time-related vesting
- In 2023: 75% performance-related and 25% time-related vesting
Of note, Cook's target compensation for 2022 was $84 million, but he actually earned around $99.4 million because much of his compensation is performance-based and tied to Apple stock. In a 2015 interview, Cook said he wanted to donate all of his wealth through a "systematic approach." At the time, he said he had started donating "quietly," but did not provide details. Apple's board of directors implemented a policy in 2017 requiring Cook to use a private jet for all of his business and personal travel for "safety and efficiency reasons."
Tim Cook's private jet costs
Since this policy was introduced, people have been keen to know how much Apple spends on Cook's use of a private jet and on security costs. For 2022, Apple says it spent $591,196 on Tim Cook's security. This represents the "incremental costs Apple spends on personal security services for Mr. Cook, determined by allocating both direct costs and a percentage of the fixed costs Apple spent on providing those personal security services." As for the private jet, Apple says it spent $767,319 on Cook's flight costs. This includes Cook's personal use of the private plane based on the hourly flight cost and other variable costs Apple incurred for that use, including variable fuel costs, departure fees, and landing fees. (Image: Apple)
