New Retail SVP Angela Ahrendts Receives Signing Bonus Worth $68 Million

[GeneralChang]

Ah yes, one hears this a lot. Enormous salaries are justified because of the "value" one brings to the company. An entirely subjective standard that is often completely contradicted when a high level executive is terminated either for under performing or because of a behavioral issue--they still get their money regardless.

What is the definition of "value"? Is your life valuable? Is the teacher of your children valuable? Executives aren't special unicorns of talent -- there are millions of people that could do their jobs. What is unique about them is their *access* to these roles and their position in the society that awards them.

I'd argue that Kim Kardashian adds no value to our society--yet gets access to enormous resources to squander on herself. Anyway, this situation isn't unique to this time period or to the U.S. obviously. However, the sheer scale of the misappropriation of resources and what we "value" seems to be increasing.

I think there’s something to be said for not measuring value in money. That’s the only way they can manage it in the business world, but that’s certainly not how I measure the people around me to be of value. Otherwise I’d have to figure out how to pay my kids a fairly exhorbitant salary.

The fact is, money is how value is expressing the business of commodity trading, and the relationship between a company and an employee is no different. The company exchanges money exactly equal to what they consider the employee to be worth. Let’s be honest; I could not fulfill the responsibilities required of a marketing executive at Apple, and I don’t think many people around here could. Frankly, I don’t want those responsibilities. I would hate that. So are my talents less valuable than those of a tried-and-proven marketing executive? In business terms, yeah. And since I don’t measure my self-worth (or the worth of any individual) in money, I’m fine with that. Measuring the worth of an individual in money is what companies do, always has been. But that doesn’t mean that we, as individuals, do that as well. Because I don’t. I guess I can’t speak for the rest of the world, but I’ve never felt like I have been judged based on monetary means either. Not on a personal basis, anyways.

That being said, I totally agree with you that good teachers are underpaid.

 

[Nunyabinez]

Ah, the wonders of gender-based affirmative action...

You don't even know what that word actually means.

The term "affirmative action" was first used in the United States in Executive Order 10925 and was signed by President John F. Kennedy on March 6, 1961. It was used to promote actions that achieve non-discrimination. In 1965, President Lyndon B. Johnson issued Executive Order 11246 which required government employers to take "affirmative action" to "hire without regard to race, religion and national origin".[clarification needed] In 1967, sex was added to the anti-discrimination list.[6]

Affirmative action is not quotas or hiring minorities over more qualified individuals. That was total mis-application of the concept.

If you have some proof that she was not the most qualified PERSON for the job then offer it up.

And, I would actually applaud this as a success for affirmative action, just like the Rooney rule in football that got black coaches THAT DESERVED to be coaches into their jobs.

 

[charlituna]

That's more than I'll make in my lifetime. And she gets that just for signing on to Apple? Dang.

But is it really that much. The article implies that she doesn't get it all now, at the current price. It comes in batches and she gets the price current at the time that each batch comes up.

If the article is correct it's roughly 30k shares each time. The first is pre the split. So assuming that the shares don't tank before the end of the month that will be 30k at around $600 each. The contract may be written that those invested shares don't split which means that next year her 30k shares could only be $100-200 each. That is a huge cut in money, especially if she doesn't get the split (which would balance out the value drop)



----------

Please read the article properly . She doesn't get 68 Million to sign the contract.

1. It is paid in installments to reward the success of her strategy. No success = no shares.

That is not entirely true. Or rather you have simplified it way too much.

Assuming that no success doesn't lead to being fired, she will get the stocks that is written in the contract. But depending on the level of success they might not be worth that much since she gets them at the value they are on the vesting date, not the value they are now.

 

[unplugme71]

Because aircraft carrier. Why do I need a reason to want one of those? That being said, I’d much rather see a mission sent to Mars, but that costs significantly more than the 13-14 billion it costs to build a carrier.

Sadly, I don't think I could even afford to operate an aircraft carrier for 1 month on my lifetime's salary, nevermind buy one.

----------

But is it really that much. The article implies that she doesn't get it all now, at the current price. It comes in batches and she gets the price current at the time that each batch comes up.

If the article is correct it's roughly 30k shares each time. The first is pre the split. So assuming that the shares don't tank before the end of the month that will be 30k at around $600 each. The contract may be written that those invested shares don't split which means that next year her 30k shares could only be $100-200 each. That is a huge cut in money, especially if she doesn't get the split (which would balance out the value drop)



----------



That is not entirely true. Or rather you have simplified it way too much.

Assuming that no success doesn't lead to being fired, she will get the stocks that is written in the contract. But depending on the level of success they might not be worth that much since she gets them at the value they are on the vesting date, not the value they are now.

I doubt it wouldn't include the split. Very unlikely that happens. Almost all RSU's are contracted to include splits, reverse splits, etc.

 

[peterdevries]

That is not entirely true. Or rather you have simplified it way too much.

Assuming that no success doesn't lead to being fired, she will get the stocks that is written in the contract. But depending on the level of success they might not be worth that much since she gets them at the value they are on the vesting date, not the value they are now.

I know. I simplified it to make it easy for some of those here that are not even able to read the original article in its entirety.

 

[peterdevries]

Ah yes, one hears this a lot. Enormous salaries are justified because of the "value" one brings to the company. An entirely subjective standard that is often completely contradicted when a high level executive is terminated either for under performing or because of a behavioral issue--they still get their money regardless.

I explained above that it is not subjective at all. The salary that Ahrendts gets is a function of a clear business case (see my previous posts on this) that is based on real-world metrics and partly on negotiation with the market as a reference.

What is the definition of "value"?

In this case it is clearly increasing the average profit per square meter and the overall profit from Apple stores by expansion. Nothing difficult about that.

Executives aren't special unicorns of talent -- there are millions of people that could do their jobs.

You are grossly mistaken. There might be millions with the theoretical knowledge, but there are only a select few (maybe 10-50) that have the specific knowledge and experience in the industry/customer segment combination that is relevant here. The fact that they had to get someone from Fashion to a consumer electronics business is enough to demonstrate this. Browett failed partly because he thought he could transplant Dixon's bargain basement strategy to a high-street retailer such as Apple.

What is unique about them is their *access* to these roles and their position in the society that awards them.

True, it is a combination of long and hard studying and working. Only very few people become CXO's because of their heritage. And if they do it is mostly in family businesses as is often the case in Europe. Rarely do these people have the chops to pull of these kinds of jobs. I have been to business school, and the kids with money did not finish at the top of the class, where the big corporations were fishing.

I'd argue that Kim Kardashian adds no value to our society--yet gets access to enormous resources to squander on herself.

I agree that Kim Kardashian doesn't add anything valuable to society, but it's not about that. It's about value to investors. There is a large corporate machine that has invested in Kim Kardashian, that makes loads of money from advertising surrounding the reality show, merchandising and selling TV rights. The money that she earns is well deserved from a point of view from the investor, and as long as society buys in to the crap that she does I think she is within rights to earn a boatload of money.

 

[heavy2healthy]

It’s without a doubt a lot of money, but is she worth it? And is anyone worth that amount of money?

In stead of reasoning this from a point of “what a person needs in life and how that compares to your own salary” like many here do, it makes more sense to look at this from what the person generates in value and how much that is worth to Apple.

Ahrendts will start at Apple with a package of objectives of which the complexity will make many people dizzy. She will absolutely have goals that indicate the increase of profit per square meter by a certain margin, Apple store market entry in certain regions, upgrade of low-performing stores, negotiating high-profile locations for country flagship stores, increasing employee efficiency, and increasing customer satisfaction. All of these goals are very easily measurable and none of these goals will be to “keep everything as it is”. That’s also why the bonus is vested, to ensure that changes she makes will have a result and that she also stays on to fully implement her vision.

The impact will be easy to calculate. If Ahrendts succeeds in generating a sustainable increase in profit per square meter that adds a few hundreds of million per quarter to Apple’s bottom line, then hell yeah she is worth it. Her bonus compared to that is a drop in the ocean.

This might not make sense for most people that have a normal job, but for this position the value that is created for the organization can be directly measured and thus it is quite easy to estimate whether anyone “is worth the money” for this job.

figure one of the ways, she will increase profits, is to start cutting people and have the new ones come in at even a lower starting wage. Its the american way.

 

[peterdevries]

figure one of the ways, she will increase profits, is to start cutting people and have the new ones come in at even a lower starting wage. Its the american way.

Although that sounds like a very popular opinion, the reality is that in most regions and countries this is absolutely impossible. In addition it would most definitely adversely impact the quality to the customer, which would lower profits.

See the kind of difficult balancing a person like this has to do? It is the experience and understanding of all the effects in fine-tuning these levers that makes people like this worth their money.

 

[Bare]

She ONLY gets the money if she can stay four year. That means doing well enough to not get fired.

In other words, if it turns out she is NOT worth the $68M they fire her before the stocks vest.

This is false.

If you look at the Form 4 filing, 26% of the largest of these five grants of RSUs vests on June 1, 2014. Basically, almost $10 million of this vests in a month.

The other disappointing thing about this grant is that it's only 15% performance-based. 85% of it, or about $57 million, is just based on her still being employed as of the vesting date. The other 15% is based on total shareholder return, but if TSR goes well-above the target laid out in this grant over the vesting period, she could see as much as an additional $10 million. So the potential value of this grant is almost $78 million.

On the one hand this is an obscene amount of value, but some level of stock compensation is very important for executives. Apple has to know that each of its execs has a direct, vested interest in increasing the value of the company.

PM me for more Compensation (especially exec comp) analysis

 

[WinstonRumfoord]

Instead of ridiculous bonus sums, why not increase the hourly wage for your hard working retail employees, Apple.

Because pretty much any bro off the street can sell someone an ipad in an apple store?

 

[GeneralChang]

Sadly, I don't think I could even afford to operate an aircraft carrier for 1 month on my lifetime's salary, nevermind buy one.

Operate shmoperate. I’m thinking it’d make one heck-of-a lawn ornament.

Though to be fair, I’d have to get a much larger lawn. Like, knocking-down-the-high-school-near-my-house bigger lawn.

 

[nexusrule]

is anybody really worth that kind of signing bonus when they haven't even seen how she performs? So weird to me, imo.

Previous working experience and professional success counts too.

 

[jetlife2]

Past performance and lost bonuses too

Don't forget that she may have been entitled to further bonuses at Burberry had she stayed. In this situation it is not unusual for a large part of the "acquiring company" bonus to be compensation for amounts lost at the "losing company".
On a (much) smaller scale I ran into this myself during a job negotiation. The acquiring company was prepared to make me whole, at least, partially for lost bonuses.

 

[TallManNY]

But is it really that much. The article implies that she doesn't get it all now, at the current price. It comes in batches and she gets the price current at the time that each batch comes up.

If the article is correct it's roughly 30k shares each time. The first is pre the split. So assuming that the shares don't tank before the end of the month that will be 30k at around $600 each. The contract may be written that those invested shares don't split which means that next year her 30k shares could only be $100-200 each. That is a huge cut in money, especially if she doesn't get the split (which would balance out the value drop)



----------



That is not entirely true. Or rather you have simplified it way too much.

Assuming that no success doesn't lead to being fired, she will get the stocks that is written in the contract. But depending on the level of success they might not be worth that much since she gets them at the value they are on the vesting date, not the value they are now.

There is no chance that the number of shares don't increase with the stock split. Just none.

Also, the expected value of the stock is that it will go up. US stocks have, historically, increased in value by 8% or so a year. I'm an Apple stock holder and hence I'm taking a bet that Apple's shares will continue to increase.

Everyone should keep in mind that she will receive another large batch of RSU next year that will vest over another four or five year period of time. And she will get more shares new batches every year going forward. Yep, C-Level executives at big companies get paid a lot.

Is she worth it? Well, let's put it this way. A few bad high level decisions made at a company of Apple's scale could easily take out tens of billions in shareholder value and billions in revenue. She will make decisions that will move billions. We will have some sense if she makes good decisions or not in the years to come.

 

[blcamp]

Give the Girl a Break. Seriously.

She just came over from one of the most fashionable and expensive brand names on this or any other planet.

She has already proven to have a clue or two about how to sell stuff.

If she can do in Cupertino what she's already done in London, she will very much have earned the coin she's getting. Few have the kind and caliber of talent Apple needs and Angela Ahrendts has shown.

Those of you jealous of the money - get over it. Success should be celebrated, not derided.

These folks make and market devices that enrich our lives and make us money. It's worth it.

So give the foolish envy a rest, alright?

 

[TallManNY]

This is false.

If you look at the Form 4 filing, 26% of the largest of these five grants of RSUs vests on June 1, 2014. Basically, almost $10 million of this vests in a month.

The other disappointing thing about this grant is that it's only 15% performance-based. 85% of it, or about $57 million, is just based on her still being employed as of the vesting date. The other 15% is based on total shareholder return, but if TSR goes well-above the target laid out in this grant over the vesting period, she could see as much as an additional $10 million. So the potential value of this grant is almost $78 million.

On the one hand this is an obscene amount of value, but some level of stock compensation is very important for executives. Apple has to know that each of its execs has a direct, vested interest in increasing the value of the company.

PM me for more Compensation (especially exec comp) analysis

The interesting thing about this level of compensation is that I think it actually backfires in aligning interest. The shareholders interest is for the company to make more money (thereby increasing stock price, thereby increasing shareholder wealth). But the executive, via a grant this large, has had their need/desire for wealth largely satisfied. There is decreasing utility to wealth. For example, a car is a great thing to own. A better car, for example a Porsche, is better and you get some additional utility. But you get very little utility out of your third Porsche in your garage. Same thing with your second boat or your second vacation home. It just isn't going to add much to your life.

There are many reasons to be motivated to do a great job at Apple. But since absolute stunning wealth has now been guaranteed by this contract, I don't suspect an increase in share value and therefore slightly higher amounts of wealth is going to be very high up on the rank of motivations. At least not for most people. You need a literal addiction to money (and this has been recently discussed as something that one develops in financial sectors) in order for money to remain a major motivator once you have tens of millions of dollars. So I think these compensation schemes don't really work all that well. But since everyone is giving them out, the companies pay them to get their pick of candidates. If she makes good choices, she will be worth this money and more in terms of creating shareholder value.

 

[unplugme71]

Operate shmoperate. I’m thinking it’d make one heck-of-a lawn ornament.

Though to be fair, I’d have to get a much larger lawn. Like, knocking-down-the-high-school-near-my-house bigger lawn.

Why not turn it into the new high school ?

 

[Larry-K]

Yet another example of the stupidity of the planet. NO ONE is worth that!
From clothing to tech even.. what were they thinking!

Maybe they'll get a soft drink guy next, oh wait...

----------

She just came over from one of the most fashionable and expensive brand names on this or any other planet.

She has already proven to have a clue or two about how to sell stuff.

If she can do in Cupertino what she's already done in London, she will very much have earned the coin she's getting. Few have the kind and caliber of talent Apple needs and Angela Ahrendts has shown.

Those of you jealous of the money - get over it. Success should be celebrated, not derided.

These folks make and market devices that enrich our lives and make us money. It's worth it.

So give the foolish envy a rest, alright?

Was that beverage you imbibed Lime or Grape?

 

[pdaholic]

Being in the medical field, every time I see one of you write "nobody is worth that much!" I think of this:

http://datagenetics.com/blog/april12011/index.html

So, from an elemental standpoint, none of us are worth that much...but when you consider how much our organs are worth on the, umm, "black organ market/'I woke up in a tub full of ice next to a phone with a note saying call 911'" I suppose we are worth much more.

 

[Sandollars]

Angela is worth EXACTLY

what Apple will pay that she agrees to. This is the free enterprise system. This is how everything is done in the US. If everyone wants a widget that costs 2 bucks to build, do you think the makers of the widget price it at what they believe is a reasonable markup or do you think they price it according to market demand?

Talented people are very rare and obviously Apple has placed great value on Angela. I guarantee you one thing for sure: They believe that Angela will make them many fold more than her compensation package during that same period. Corporations only care about one thing; profits. The PEOPLE who run the Corporations may have other agendas or priorities such as safety, social responsibility, etc. but if the Corporation isn't making money, then it's actually a charity and contrary to the free markets system we enjoy here in the US.

How DARE you place judgement on what a person agrees to go to work for someone else? Supply and Demand. It's that simple....

 

[mojolicious]

How DARE you place judgement on what a person agrees to go to work for someone else? Supply and Demand. It's that simple....

And how DARE you suggest that anyone's labour/knowledge is worth that much?

Supply and demand? You think there were companies queuing up to offer her $60m+ packages, but Apple won the day by chucking in a few further millions?

Firstly, these packages are determined by remuneration/compensation committees which are peopled entirely by other senior executives; they'll happily sign off on eight figure annual packages because it provides ammunition for their own negotiations. It's a global self-serving cabal of a few thousand super-rich, scratching each other's backs for their mutual benefit.

Secondly, Apple know full well that there are a hundred people out there who could fulfil the brief every bit as well as Ahrendts for a fraction of the money. Apple are paying so much simply in order to publicly demonstrate that they *can* pay so much.

 

[peterdevries]

Secondly, Apple know full well that there are a hundred people out there who could fulfil the brief every bit as well as Ahrendts for a fraction of the money.

Not a chance. Anyone that would get contacted by Apple would open up the last 2-3 annual reports and look up their future salary. It states explicitly what the remuneration policy is. You can be sure that they would quickly know what to demand.

 

[GeneralChang]

Why not turn it into the new high school ?

Brilliant! You, sir, deserve a raise.

 

[peterdevries]

I made a solid and factual argument for another aspect of this compensation strategy. Nobody responded.

So that's the way it goes hereabouts.

Yep, judging from the way the comments in this thread evolve, people don't even read what was said before. They just log in, blurt out some uneducated nonsense, and leave to do the same in other unrelated threads without coming back and partaking in the discussion.

This forum is sadly turning into an anger management class for spoiled and jealous children..

 

[GeneralChang]

Yep, judging from the way the comments in this thread evolve, people don't even read what was said before. They just log in, blurt out some uneducated nonsense, and leave to do the same in other unrelated threads without coming back and partaking in the discussion.

This forum is sadly turning into an anger management class for spoiled and jealous children..

On the plus side, I now have the best reason ever for wanting to buy an aircraft carrier. So something good definitely came out of this thread.

Besides, it doesn’t really matter whether people on the internet think Ahrendts is worth that much to Apple. Apple thinks she is, end of story. A much more useful line of reasoning is what is she going to do to Apple’s retail division to justify that signing bonus? I’m not terribly familiar with what she’s done in previous positions, so I’m curious.