Jobs compensation up 1,000%

[MacBytes]

Category: News and Press Releases
Link: Jobs compensation up 1,000% (http://www.macbytes.com/link.php?sid=20040728112013)
Posted on MacBytes.com (http://www.macbytes.com)

Approved by Mudbug

[gerardrj]

How can so many reporters be so wrong, or at least slanted?

Restricted stock issuance is not income. You can't know what the stock will be worth when he recipient cashes it in. It may actually result in a "loss" compared to the price when the stock was given.

[Peyote]

*yawn*

[wdlove]

CEO compensation should be tied more to the workers. It is just not right for them to make what it takes the workers a lifetime. Just like lawsuits in the end we are paying for that salary. Prices going up more than inflation are nothing but greed.

[gerardrj]

Prices going up more than inflation are nothing but greed.

You DO understand that inflation is the rate of increase of prices, right?
Did you mean executive salaries?

[ajkst1]

IIRC, his salary is only $1. His compensation package (stock options, private jet, etc.) is where his "real" salary is. Thus, his "salary" is directly tied to the performance of the company. Apple's stock has done incredibly well over the past 6 months. If he sold part of his stock, he would make quite a bit of money. If the stock tanks over the next 6 months, he wouldn't make that much (depending on the price the stock is set at in the option). This means if Steve wants big money, he'll make sure the company performs well.

Major shareholders understand how his "salary" works. They have rewarded him for great performance in the company. What would be really nice would be to see Steve sell a bunch of his stock options and give the resulting money as a bonus for all Apple employees (retail, programmers, engineers).

No, I don't work for Apple (wish I did though!)

[FosterKanig]

I am truly confused by this, and I hope someone can explain it.

Steve leads this list every year it seems, but are these new stock options? Or is he leading the list with the same options every year? And for simple math let's say his options were worth 100 million in 2001. And his options were worth 120 million in 2002. And 140 million in 2003. And 160 million in 2004.

It seems like he leads the field in compensation each year, but to me, it seems like he leads with the exact same number of shares. It's not like he cashed 100 mil, and then 120, etc.

I am just confused by the whole thing. Is he getting new shares each year, or is it the same shares over and over again? Which would imply that the compensation should be divided by the number of years he hasn't cashed in his shares. This is a question that has confused me for a few years now.

I know he is making "big bank", I am just curious if it is as profitable as it seems.

[autrefois]

As much as I love Apple's products, no single person deserves to make so much money.

I don't care if Steve Jobs stayed up late nights and personally invented intergalactic teleportation: his compensation should not go up 1000% from its already ridiculously high levels last time around.

The average CEO's compensation should not be going up double-digit percents unless workers' compensation goes up the same. This money needs to be invested in the health and welfare of workers. Or at the very least, it can be invested in product development or production in Apple's case. Both of these would better serve Apple's interests, and they would have the added bonus of being the right thing to do.

I'm extremely glad Apple is doing so well. Whether Jobs' salary is $1 or not, however, his total compensation should not be allowed to get so high.

[Krizoitz]

As much as I love Apple's products, no single person deserves to make so much money.

I don't care if Steve Jobs stayed up late nights and personally invented intergalactic teleportation: his compensation should not go up 1000% from its already ridiculously high levels last time around.

The average CEO's compensation should not be going up double-digit percents unless workers' compensation goes up the same. This money needs to be invested in the health and welfare of workers. Or at the very least, it can be invested in product development or production in Apple's case. Both of these would better serve Apple's interests, and they would have the added bonus of being the right thing to do.

I'm extremely glad Apple is doing so well. Whether Jobs' salary is $1 or not, however, his total compensation should not be allowed to get so high.

OK so here's how it works. Steve Jobs gets stock options. The company does really really well. Apple's stock goes up. Steve sells some of that stock. He gets alot of money. He also gets some more stock options (with restrictions like the last ones). The reason he got more money is because Apple did so well. i.e he only gets lots of money if he and the company perform. If Apple does poorly and the stock drops he theoretically loses money. In fact he may not actually have made any money at all. He may just have that much in stock value. You can't tell him that he can't use his stock options just because they are really highly valued. Besides, any money he gets from selling stocks doesn't hurt employees by paying them less. I don't know if employees get stock options but if he is gettin ghtat much of a return on investment so are they.

[broken_keyboard]

Steve Jobs is great - he is able to look at the trees and the forest at the same time. He deserves every $.

[yamabushi]

OK so here's how it works. ...
This is not quite true. That is how it was originally conceived to work but the reality is quite different. This recent survey looked at exercised stock options when calculating the total value of the executive compensation package. That means that those options that an executive earned but did not exercise are not counted. Stock options are also not exactly the same thing as restricted stock sales.

Typically an executive earns the option but not the obligation to buy stock from the company at below market value. How far below market value this is depends upon the conditions set in the contract as well as market conditions. Most often the timing is set up so that the executive is free to exercise the option when they can maximize their benefit so they are very likely to avoid temporary slight drops in stock price. They are also usually free to immediately sell the stock at market price and almost always choose to do so. So unlike a regular restricted stock purchase an executive can use timing to increase their gains or even not make any purchases at all and thus lose nothing. Their chances of losing money on an option deal are little to nothing depending on the conditions set in the contract.

So in reality this amounts to a salary since they receive a cash benefit and the company loses cash that they would have gained from selling the stock at market price. This is why many financial professionals are now encouraging companies to treat stock options as an expense. This was recently put up to a vote at Apple but was defeated.

Many technology companies defend the practice on the grounds that it is a very effective way to motivate executives in a highly competitive and rapidly growing industry. Having a financial interest in the company can help imrpove employee loyalty and performance. However, much of this benefit is lost in the case of immediately exercised options rather than stock that is bought and held for an extended period of time. Also, even with some sale restrictions in place the problem persists since an executive can both influence the share price by various means and can often utilize older options for current benefit.

I feel that a more transparent and honest way of structuring compensation is to use a variable salary that is tied to multiple long term financial performance figures. This is often called a performance bonus. Unfortunately such bonuses are often tied to either too few or easily manipulated figures. However this is easily remedied via the contract for executive compensation.

As executives benefit, so should stockholders. Stock dilution and options packages unfortunately cause this to often not be the case.

[adamfilip]

I don't care if Steve Jobs stayed up late nights and personally invented intergalactic teleportation:

if he did invent it.. he would deserve.. trillions! as long as he made the technology freely available to everyone..