This is not true. Take Tim Cook for example. He was given Restricted Stock Units (RSUs) as a retention bonus. They vest after 5 and 10 years. When his RSUs vest, he will pay his normal income tax rate (for him the highest bracket). Any gains after that date he makes on those shares are taxed at the capital gains rate.
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Apple Executives and Directors Required to Hold 3x - 10x Base Salary in AAPL Stock
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This is not true. Take Tim Cook for example. He was given Restricted Stock Units (RSUs) as a retention bonus. They vest after 5 and 10 years. When his RSUs vest, he will pay his normal income tax rate (for him the highest bracket). Any gains after that date he makes on those shares are taxed at the capital gains rate.
No, I was comparing the $900,000 to the $1.25 Million. Either way, who really cares?
HR staff to enforce. 
chai tea = tea with milk tea
chai tea latte = tea tea milk milk
sushi roll = rice roll roll
No, he was paid $900K in cash, before taxes, and aside from a couple of bucks for his 401K and some life insurance, everything else was Apple stock, most of which was contingent on his still being there when it vests. If Apple stock tanks even he would have relatively little preserved from 2011, let alone senior executives who are paid less in cash.
Of course, the policy doesn't require a function of GAAP, SEC, or IRS compensation, just a multiple of base salary, but my point is that being under-diversified is foolish and unnecessary to ensure that senior executives are adequately motivated to create maximum long-term shareholder value. In fact, it is likely to perversely motivate managers to act otherwise.
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Yeah, being on conference calls at 2am on a Friday night, being held accountable for 24,000 employees, working 16 hour days for weeks at a stretch and learning the downside of having a smartphone or adding "staycation" to your vocabulary. That's the life.
Yeah, it would be so much better eating, sleeping and breathing work for low five figures and getting fired if the company's other employees do their jobs poorly...
There are conversations that can be had about what is appropriate executive compensation, but that conversation isn't remotely comparable to trying to determine appropriate compensation for the individual contributor whose actions can't negatively impact thousands of employees, shareholders and have ripple effects throughout the economy.
It's fashionable to characterize all CEO's as overpaid, but the problem isn't CEO's who produce stellar performance. It's pay for poor performance that is where the problem resides... Cook's compensation model, which binds him to the long term success of the company, which in turn keeps 24,000 people employed, is basically Apple's board's decision. The government doesn't pay him, so it's a transaction between the shareholders and Cook... it's up to the board and by proxy the shareholders to determine what Cook's expertise is worth to them.
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Yeah, being on conference calls at 2am on a Friday night, being held accountable for 24,000 employees, working 16 hour days for weeks at a stretch and learning the downside of having a smartphone or adding "staycation" to your vocabulary. That's the life.
Yeah, it would be so much better eating, sleeping and breathing work for low five figures and getting fired if the company's other employees do their jobs poorly...
There are conversations that can be had about what is appropriate executive compensation, but that conversation isn't remotely comparable to trying to determine appropriate compensation for the individual contributor whose actions can't negatively impact thousands of employees, shareholders and have ripple effects throughout the economy.
It's fashionable to characterize all CEO's as overpaid, but the problem isn't CEO's who produce stellar performance. It's pay for poor performance that is where the problem resides... Cook's compensation model, which binds him to the long term success of the company, which in turn keeps 24,000 people employed, is basically Apple's board's decision. The government doesn't pay him, so it's a transaction between the shareholders and Cook... it's up to the board and by proxy the shareholders to determine what Cook's expertise is worth to them.
After a fashion. As a practical reality, the stockholders have little say in what a CEO is paid, and as a matter of history, a CEO has to foul up pretty badly to get canned. Even then they generally walk away with a bag of cash. Fashionable or otherwise, it's still true.
That should lead to a discussion of what the appropriate compensation structure should be... not simply "they get paid too much."
What defines "too much"? Is there a fixed number in people's imaginations that they would like to see nobody get paid beyond? For some there is, but that's ludicrous.
Shareholders all have a say in approving compensation. How much of a say they have is proportional to their ownership in the company. Is there a better model than that? That's a more complicated conversation ... imagine you're in a company with two partners. One of you has put up 80 percent of the capital and the others 20.... Would it be right for the two that put up 20 to have an equal say in the company's decisions? Of course not.
Since the financial crisis, many organizations have been more reluctant to blindly issue options like play money and more conscientious about tying RSU's to tenure and performance.... because the shareholders, board members especially, have been monumentally screwed by giving too much rope in the past.
Two other mechanisms that can be useful are risk-weighted compensation, which I'm a big proponent of (using leverage to generate 10% growth is not the same as doing it with available cash; the reward should be weighted differently, and the CEO who exposes the shareholders to tremendous risk should be negatively penalized against other compensation awards to a logical net out), and compensation committees on the board that are independent of the officers themselves and/or people with other conflicts of interest.
But an honest-to-god transaction where the compensation committee has arrived at a figure that's conservative but competitive enough to retain the talent they want shouldn't be poo pooed purely for the sake of being angry and not knowing where exactly to direct that anger... Warren Buffett gets paid substantially less than Ajit Jain for reasons that have nothing to do with how hard Warren or Ajit work. That's just not the reality of what it takes to run an organization if you're trying to retain people who simply by nature cannot have the same vested interest that the founder does. Steve Jobs? Same example... Nobody working at Apple today can ever have the same vested interest that Steve Jobs had in the future of that company for the reasons he had it.
So, if they want talented people, they have to compensate them in a way that will retain them... or risk losing them.
But people have this idea that any number above one million is absurd.... thinking that CEO's ought to be paid for their degree of exertion rather than the value their intellectual capital brings to the company's operating prospects. And that's where there's just no comparison to the person you're paying an hourly rate for a given skill set.
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Yeah, being on conference calls at 2am on a Friday night, being held accountable for 24,000 employees, working 16 hour days for weeks at a stretch and learning the downside of having a smartphone or adding "staycation" to your vocabulary. That's the life.
Yeah, it would be so much better eating, sleeping and breathing work for low five figures and getting fired if the company's other employees do their jobs poorly...
There are conversations that can be had about what is appropriate executive compensation, but that conversation isn't remotely comparable to trying to determine appropriate compensation for the individual contributor whose actions can't negatively impact thousands of employees, shareholders and have ripple effects throughout the economy.
It's fashionable to characterize all CEO's as overpaid, but the problem isn't CEO's who produce stellar performance. It's pay for poor performance that is where the problem resides... Cook's compensation model, which binds him to the long term success of the company, which in turn keeps 24,000 people employed, is basically Apple's board's decision. The government doesn't pay him, so it's a transaction between the shareholders and Cook... it's up to the board and by proxy the shareholders to determine what Cook's expertise is worth to them.
His compensation is more than anything average person can dream to make. He makes 1.4 million because the higher you go up, the more your worth is based on companies performance. It's no brainer. And if he fails, from a money standpoint, he's good to go maybe not psychologically. Let me stay up 2am, let him handle all the stuff. His job is the run a company. And in this case, one of the biggest companies in the world.
So i don't mind the amount get gets. And what controls his pay is the board of directors. They are basically their boss and in turn, try and make sure the shareholders are happy because the shareholders are their boss.
I have no clue why i'm typing. Maybe I just want to type.
Anyways, spring training has started. WOOT
Well, I never said that precisely, or even approximately. Over the last decade or so, the trend has been towards sharply increasing CEO compensation, broadly speaking, particularly as compared to others workers who are not CEOs. This is a fact that needs to be explained somehow. The "retention" argument is a bit empty, as for some mysterious reason it doesn't seem to apply in the same way to CEOs running companies outside of the US, where CEO compensation isn't nearly as out of scale. Another fact that needs to be explained somehow.
The truth is, the relationship between boards of directors and CEOs tends to be quite incestuous. If corporate governance practices were better in the US, we might see them bathing each other in goat's milk somewhat less often.
Good luck with that.
The cases where that applies is why I advocate for independence of the compensation committee and I champion Raghuram Rajan's proposal for risk-weighted compensation. Keep in mind that I work alongside these people but I don't have their level of accountability. I don't aspire to have their jobs, but I do a lot of 16 hour days myself... I'm not talking about people who cut out early on a Thursday to do the back nine. They don't last long.
I'm talking about people who work a lot more than even me and have many more plates spinning than I would ever ask for at any salary.
This is a bad idea. First, you're going to see people subject to these requirements taking less base salary and transition to other pay structures such as bonus, stock options, etc.
Secondly, I personally feel like this is a bad way to incentivize CEOs and directors/executives. This makes them want to increase the stock price - sounds good right? Well, look into the details. What's the easiest way to do this? Let's see - cut costs, use cheap chinese labor, increase price of products and gross revenue. All of these examples are the very same issues people ccomplain about.
Instead, I think there should be a "health" factor that stock price is also based off of. Will economics be considered? Sure. But companies should also be rated in terms of how moral their actions are, their support for their country, etc. These are the things I want to incentivize. If this "health" factor weighs in as heavy or heavier on the stock price, then CEO's goals are in line with the general public. If investors decide to buy stock in companies that have higher "health" factors and bought products to support said companies - your wealth and investments would appreciate.
Not just by the dollar amount of the stock gains either, because if you have a "healthier" local/national business even though perhaps not as profitable - more people will have jobs pay decent salaries locally. Both employees of the company that is growing domestically, as well as growth to companies domestically that gain their business.
The above occurrence creates a domino effect:
I believe the factor for each job "newly created" in an economy, supports up to 9 other jobs. One more person to buy food, clothes, goods, services, spending in the domestic economy. As you can see, profits aren't nearly that important, as Apple has a BOATLOAD of cash it is sitting on. What are they going to do with that money? Well, due to the current incentives you're forcing on them, most likely buyout a company overseas, or invest in low cost centers to further increase profits, and so on and so forth.
For all those who are in favor of this, don't whine about their unethical practices of using cheap labor, outsourcing work, not paying Apple Store employees enough. You are your own worst enemy.
Secondly, I personally feel like this is a bad way to incentivize CEOs and directors/executives. This makes them want to increase the stock price - sounds good right? Well, look into the details. What's the easiest way to do this? Let's see - cut costs, use cheap chinese labor, increase price of products and gross revenue. All of these examples are the very same issues people ccomplain about.
Instead, I think there should be a "health" factor that stock price is also based off of. Will economics be considered? Sure. But companies should also be rated in terms of how moral their actions are, their support for their country, etc. These are the things I want to incentivize. If this "health" factor weighs in as heavy or heavier on the stock price, then CEO's goals are in line with the general public. If investors decide to buy stock in companies that have higher "health" factors and bought products to support said companies - your wealth and investments would appreciate.
Not just by the dollar amount of the stock gains either, because if you have a "healthier" local/national business even though perhaps not as profitable - more people will have jobs pay decent salaries locally. Both employees of the company that is growing domestically, as well as growth to companies domestically that gain their business.
The above occurrence creates a domino effect:
I believe the factor for each job "newly created" in an economy, supports up to 9 other jobs. One more person to buy food, clothes, goods, services, spending in the domestic economy. As you can see, profits aren't nearly that important, as Apple has a BOATLOAD of cash it is sitting on. What are they going to do with that money? Well, due to the current incentives you're forcing on them, most likely buyout a company overseas, or invest in low cost centers to further increase profits, and so on and so forth.
For all those who are in favor of this, don't whine about their unethical practices of using cheap labor, outsourcing work, not paying Apple Store employees enough. You are your own worst enemy.
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Umm, he's not according to the SEC.
http://www.sec.gov/Archives/edgar/data/320193/000119312513005529/d450591ddef14a.htm
According to http://www.apple.com/pr/bios/ he is in the same category as the rest of them - Senior Vice President.
Whether that makes him an "executive officer" is not clear. But if he's not, then it seems that nobody else is a senior officer either.
Well he's isn't but the others are according to SEC filings. Not sure why that is as Steve told Walter Isaacson that he set it up so Ive had more operational power than anyone outside of himself: "He has more operational power than anyone else at Apple except me. Theres no one who can tell him what to do, or to butt out. Thats the way I set it up." I would assume then his compensation and stock awards are similar to the other SVPs.
http://www.sec.gov/Archives/edgar/data/320193/000119312513005529/d450591ddef14a.htm
And that differs from your bonus rating, etc., of any rank-and-file employee already how? It's already in place for the underlings so adding the same boilerplate verbiage to an exec's pay structure is easy. What are you? Some "consultant" who makes mountains out of common-sense molehills?
Fine - don't tie BASE compensation to it. If the company doesn't pay the people who actually do the front-line jobs keeping the customers happy a bonus because, you know, "it was a tough year and we faced unexpected challenges" then the LAST person that should get a bonus is some C-level or board-level executive. And last I checked - most of them get princely sums when the company does well, and still rather fat bonuses when they do poorly.
And my apologies. As a consultant I get to sit in on board meetings when "major decisions are wrestled with by the big dogs" and I have to admit - there isn't a SINGLE decision any exec has made that couldn't have just as easily been made my a mid-level manager who understands the process and has a modicum of intelligence.
Those same underlings upon whose shoulders the C-level and board executives stand, provide all the executive summaries (if they're good) and all the exec has to do is accept or reject it. 90% of the decisions are common sense and the other 10% is industry knowledge and luck.
This whole elevated stratum that we put "executives" in saying "oh, they get paid to make the tough decisions" is ************. They're no different than some rank-and-file managers who managed to make some key decisions to be in the right place at the right time to get to be part of the "in" crowd.
Am I biased? Of course! But as a consultant I make an awful lot of money just re-packaging and distilling the facts from the whining I get from the underlings to give the C-level guys and gals the perfect powerpoint and administrivial drivel to "make the obvious choices"... And yeah - some of the people I interview are WAY good at their jobs - they just lack the people skills necessary to pull a "Tim Cook" and have the stones, the drive and the leadership ability to pull things off.
Yep. I'm one of the "Bobs". It's a great job and yes - I sleep rather well at night - except when I realize some of the people I recommend getting axed are only there because the MANAGERS and DIRECTORS made the poor choices to throw bodies at every little problem and pulled them in to begin with. A few of those I was actually able to find positions at other companies where I knew needed the help and they thrived. But sadly I have only been able to sharpen my blade against the throats of only a few of the most obvious bottom-feeding executives. They are notoriously hard to kill and have very thick leather-like skins that can deflect all but the sharpest blades.
But when I am able to bag one of those cancerous growths? I do it with skill and subtlety that would make Machiavelli proud.
...However I think I'll retire and be a lawyer. Those guys get paid whether companies succeed or fail in the broadest sense...
