Apple Paying Dividends to Employees with Restricted Stock Units, CEO Tim Cook Declines to Participate

MacRumors · May 24, 2012

Apple's board has decided to award dividend equivalent payments to employees holding restricted stock units or RSUs. Apple announced a quarterly dividend of $2.65/share in March, to commence in July. RSUs are typically issued to employees to encourage them to stay with the company. They are awarded in a similar way to stock options, but convert directly into shares of stock upon vesting.

Apple CEO Tim Cook was awarded 1 million RSUs upon his promotion to CEO last year to entice him to stay with the company for the foreseeable future. Half of the shares vest in 5 years, and the other half in 10. Cook has specifically declined the dividend equivalents, turning down more than $75 million in dividend payments over the life of the RSUs.

From an Apple SEC filing today:

On May 24, 2012, the Compensation Committee (the "Committee") of the Board of Directors of Apple Inc. (the "Company") approved amendments to each outstanding and unvested restricted stock unit award granted by the Company to its employees (other than Timothy D. Cook, the Company's Chief Executive Officer). The amendments provide that if the Company pays an ordinary cash dividend on its common stock, each award will be credited with an amount equal to the per-share cash dividend paid by the Company, multiplied by the total number of restricted stock units subject to the award that are outstanding immediately prior to the record date for such dividend. The amounts that are credited to each award are referred to as "dividend equivalents." Any dividend equivalents credited to an award will be subject to the same vesting, payment and other terms and conditions as the unvested restricted stock units to which the dividend equivalents relate. Depending on the domicile of the employee, accumulated dividend equivalents will either be paid in cash or used to offset employee taxes due upon vesting of the restricted stock units.

The Committee determined these amendments were appropriate in light of the Company's announcement on March 19, 2012 that it intends to commence paying ordinary cash dividends of $2.65 per share to its shareholders on a quarterly basis sometime during the fourth quarter of its 2012 fiscal year. As restricted stock units are not outstanding shares of common stock and thus would not otherwise be entitled to participate in such dividends, the crediting of dividend equivalents is intended to preserve the equity-based incentives intended by the Company when the awards were granted and to treat the award holders consistently with shareholders.

At Mr. Cook's request, none of his restricted stock units will participate in dividend equivalents. Assuming a quarterly dividend of $2.65 per share over the vesting periods of his 1.125 million outstanding restricted stock units, Mr. Cook will forego approximately $75 million in dividend equivalent value.

Article Link: Apple Paying Dividends to Employees with Restricted Stock Units, CEO Tim Cook Declines to Participate

futbalguy · May 24, 2012

That is a lot of money to turn down. Wow.

JUiCEJamie · May 24, 2012

Very very admirable! Mr Cook is doing a great job as CEO. He's doing a lot of things differently to his predecessor too! I like it a lot!

Shrink · May 24, 2012

Impressive on Cook's part.

It must be nice to be able to turn down $75 million.

Nevertheless...pretty classy.

CalfCanuck · May 24, 2012

He can still look himself in the mirror now!

futbalguy said:
That is a lot of money to turn down. Wow.

He is putting a lot of new policies for Apple employees into place, and he does not want it to appear to benefit from them himself.

He knows that he was awarded a BUCKET of shares recently - more than he'll ever need. So why risk polluting his broader goals for the company with personal issues?

afin · May 24, 2012

Notable. Now lets see the "99%" folks try to spin that badly.

user418 · May 24, 2012

Admirable. I'm sure it will be recouped in some other shape, form, or fashion.

Wonder if Jaime Diamond read this?

Swift · May 24, 2012

CalfCanuck said:
He is putting a lot of new policies for Apple employees into place, and he does not want it to appear to benefit from them himself.

He knows that he was awarded a BUCKET of shares recently - more than he'll ever need. So why risk polluting his broader goals for the company with personal issues?

He may or may not be the highest-paid CEO in the US, depending on what you mean by "paid." But I think he's earned every penny. He's not taking compensation on the scale of their growth even yet. Maybe if he finishes ten years, and gets the big stock bundle.

jlgolson · May 24, 2012

He's actually turning down a lot more than $75 million. There is a near-zero chance that the dividend doesn't get increased at some point in the next 10 years.

Peace · May 24, 2012

I'm sure Mr. Cook turned it down to avoid any conflict of interests. Being CEO could do that.

The Board of Directors declared the dividend. It could be seen as insider manipulation.

jlgolson · May 24, 2012

Peace said:
I'm sure Mr. Cook turned it down to avoid any conflict of interests. Being CEO could do that.

The Board of Directors declared the dividend. It could be seen as insider manipulation.

What are you talking about?

This was decided by the Compensation Committee, of which Cook is not a member. Campbell, Drexler, Gore and Jung sit on it.

khovland92 · May 24, 2012

Wow second positive article about Tim Cook I read about today.

http://www.businessinsider.com/tim-cook-eats-lunch-with-random-apple-employees-in-cafeteria-2012-5

TMay · May 24, 2012

JUiCEJamie said:
Very very admirable! Mr Cook is doing a great job as CEO. He's doing a lot of things differently to his predecessor too! I like it a lot!

Steve Jobs worked for $1 a year for (at least) most of his tenure with perks like a Gulfstream V. I'm sure that someone here knows the details without a specific search, but to me it gives context to how much Apple meant to him and his legacy.

BTW, almost all of Steve's wealth is from the sale of Pixar to Disney for stock, at the time some $7 Billion, and he and his family lived a relatively modest lifestyle for a billionaire.

I'm always surprised when people make quite despicable comments based on his first tenure at Apple, not accounting for his maturation at Next and Pixar, and certainly not at his second tenure at Apple.

http://www.redmondpie.com/steve-jobs-annual-salary-at-apple-1997-2011-was-less-than-yours/

CalfCanuck · May 24, 2012

Peace said:
I'm sure Mr. Cook turned it down to avoid any conflict of interests. Being CEO could do that.

The Board of Directors declared the dividend. It could be seen as insider manipulation.

Exactly. Someone else structured the million RSUs to entice him to stay on as CEO for a set period. But this is HIM trying to structure something for the other Apple employees. Most of the non-executive employees have a fraction of his RSU - hence this policy is a bit of a sweetener for them to stay at Apple until they vest.

Peace · May 24, 2012

jlgolson said:
What are you talking about?

This was decided by the Compensation Committee, of which Cook is not a member. Campbell, Drexler, Gore and Jung sit on it.

They are all members of the Board of Directors.

And had Tim said he didn't think there should be a dividend I'd bet there wouldn't be.

guspasho · May 24, 2012

afin said:
Notable. Now lets see the "99%" folks try to spin that badly.

What in the world does one have to do with the other?

nikhsub1 · May 24, 2012

He should take it and donate it all to pancreatic cancer research.

M1chbeck · May 24, 2012

More money, more problems.

MacDav · May 24, 2012

Don't Agree

I think dividends should be payable when the employees actually have the ability to sell the stock they own. In a sense they are getting paid for stock that isn't completely vested to them. Potentially billions of dollars?

macchiato2009 · May 24, 2012

when would Apple start rewarding its employees all around the world for working their ass off ???

salespersons, geniuses and all the guys who stand from early in the morning until late every evening to sell and repair all Apple products for minimum to average wages...

the company makes billions, regular employees get peanuts

oh yeah, a few discounts per year... money that goes back to Apple's pocket

IJ Reilly · May 24, 2012

Peace said:
I'm sure Mr. Cook turned it down to avoid any conflict of interests. Being CEO could do that.

The Board of Directors declared the dividend. It could be seen as insider manipulation.

The issue of executive compensation can be a conflict of interest, but not a manipulation. The foxes guarding the henhouse. That is why these theoretically independent compensation committees are set up. It's considered to be good corporate governance.

jlgolson said:
What are you talking about?

This was decided by the Compensation Committee, of which Cook is not a member. Campbell, Drexler, Gore and Jung sit on it.

So is the committee really independent when the board members who sit on it are often hand-picked by the CEO? At least this was the case when Steve Jobs was CEO. I don't seriously expect compensation committees to be truly independent.

The only question that irks me as a stockholder is how many of these RSUs are floating around. That number is curiously missing from the 8-K disclosure so we don't have any idea how much Apple will actually be paying out.

strider42 · May 24, 2012

TMay said:
Steve Jobs worked for $1 a year for (at least) most of his tenure with perks like a Gulfstream V. I'm sure that someone here knows the details without a specific search, but to me it gives context to how much Apple meant to him and his legacy.

BTW, almost all of Steve's wealth is from the sale of Pixar to Disney for stock, at the time some $7 Billion, and he and his family lived a relatively modest lifestyle for a billionaire.

Jobs also owned a large number of shares in Apple: http://techland.time.com/2011/01/12/steve-jobs-still-makes-a-1-salary/ This article was written in the begining of 2011. In today's stock values, that is worth over 3 billion dollars. Plus all his other perks. steve made a lot of money at apple as well. I do think he was more concerned with the company and his elgacy then the money, but the $1 a year thing gets thrown around like he did it all seflessly, and he msot certainly did not.

Bahamut Eos · May 24, 2012

afin said:
Notable. Now lets see the "99%" folks try to spin that badly.

Easy:

75 million dollars that USA can't tax, the money stays with the company, and makes his stock worth that much more.

Plus I doubt it was his decision.

I do like Tim Cook though.

LaWally · May 24, 2012

user418 said:
Admirable. I'm sure it will be recouped in some other shape, form, or fashion.

Wonder if Jaime Diamond read this?

Did you mean Jamie Dimon, CEO of JPMorgan? If so, I don't see how he's relevant to this story.

srxtr · May 24, 2012

Can I get some of that money? I promise I'll use all of it to buy Apple products only

Apple Paying Dividends to Employees with Restricted Stock Units, CEO Tim Cook Declines to Participate

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