Apple CEO Tim Cook Accepts 40 Percent Pay Cut

Apple CEO Tim Cook announces a new lineup of products during a special event at Apple Park in Cupertino, Calif., on Mar. 8, 2022. Brooks Kraft/Apple Inc./Handout via Reuters

Apple CEO Tim Cook is taking a significant pay cut in 2023, according to a filing with the Securities and Exchange Commission (SEC) on Thursday.

Cook’s total compensation target for the year will be $49 million, which is 40 percent less than the previous year, according to the filing. He'll also get fewer restricted stock units if he leaves before 2026, according to the company.

Apple’s committee on executive compensation, comprised of Art Levinson, Al Gore, and Andrea Jung, said in the filing that the decision was made after taking into account shareholder feedback, Apple’s “exceptional performance,” and a recommendation from Cook himself.

“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,” the committee said in the filing.

The company’s compensation committee makes decisions about executive pay before the beginning of each fiscal year, and in 2022, the results of the Say on Pay advisory vote led to increased involvement from shareholders.

The committee said that the changes were made to respond to shareholder feedback, while still aligning pay with performance and recognizing Cook’s “outstanding leadership,” according to the filing.

Package

According to the filing, the committee balanced a number of factors when determining Cook’s much larger pay in 2022, including his leadership, the complexity of his role, the board’s confidence in his strategic decisions, the company’s financial performance, and shareholder feedback.

When determining his pay for 2023, these factors were weighed against a desire to provide performance and retention incentives for Cook, who supported changes to his compensation to reflect the feedback received from shareholders, the filing states. As a result, the committee maintained the cash components of Cook’s 2023 compensation and reduced his target equity award grant value.

The total figure comprises his base salary of $3 million, which remains unchanged, his annual cash incentive of $6 million, which also remains unchanged, and his equity award value, according to the filing. This equity award value dropped from $75 million in 2022 to $40 million in 2023.

Besides lowering the overall goal, 75 percent of the shares that Cook will be able to acquire will be linked to Apple’s stock performance in 2023, as opposed to the previous 50 percent.

Since Cook became CEO, Apple saw a significant increase in its relative total shareholder return of around 1,212 percent by the end of 2022, which greatly exceeded the S&P 500 Index’s rise of roughly 290 percent during the same time frame, according to the company. In addition, Apple’s market capitalization grew to more than $2 trillion.

“The majority of Mr. Cook’s compensation has been delivered through long-term equity awards since his promotion to CEO in 2011,” the filing states. “The equity awards he has received over time align with Apple’s growth and success and the tremendous value delivered to our shareholders under his leadership.”

Cook succeeded Steve Jobs as the CEO in 2011. He guided the company through a period of rapid growth, introducing new products such as the Apple Watch, the HomePod, and the AirPods. Under Cook’s leadership, the company has also made significant investments in renewable energy and has been vocal on social issues such as privacy and inclusion.