ISS urges investors to vote against pay that is 1,447x more than average employee salary
By Jeph Ajobaju, Chief Copy Editor
Apple Chief Executive Officer Tom Cook is set to receive $82.3 million in stock awards on top of his $3 million annual salary and other compensation, with the total package at $98.7 million in 2021, up from $14.8 million in 2020.
That would be 1,447 times more than the average salary of Apple employees and it has prompted a backlash from Institutional Shareholder Services (ISS) which wants Apple investors to vote against it.
But it presents a dilemma for shareholders whose returns are now more than 1,000 per cent since Cook became CEO in 2011.
ISS expressed “significant concerns” over the $99 million (£73 million) pay package awarded to Cook, up from $14.8m the year before.
Cook, whose net worth is reportedly more than £1 billion, received the pay in shares, salary, and for other costs, as disclosed by Apple in its proxy filing with US Securities and Exchange Commission (SEC), per BBC reporting.
ISS said in a letter to shareholders that there are “significant concerns” over the “design and magnitude” of the package. “Half of the award lacks performance criteria.”
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Cook’s concern for human rights
Cook, 61, who has often spoken publicly about his concerns over equality and human rights issues, said in 2015 that he would give away his entire fortune before he dies.
His package included $630,600 in personal security costs and $712,500 for personal use of a private jet. ISS said the cost of such perks “significantly exceeded” comparable companies last year.
Last year, a SEC filing showed that Cook donated almost £7.4 million worth of Apple shares to charity, without naming the recipient.
The company behind the iPhone, iPad and MacBook became the first company to hit a $3 trillion (£2.2 trillion) stock market value in January before dipping to its current value of $2.8 trillion (£2.1 trillion).
Apple is due to hold its annual meeting for shareholders on 4 March. However, shareholder votes are only advisory, while Apple’s board decide on pay packages.
At last year’s meeting, 95 per cent of shareholder votes supported Apple’s executive compensation programme.
Growing opposition
Companies in the US, and UK are facing stronger shareholder opposition over pay and compensation, according to the BBC.
General Electric, IBM and Starbucks failed to win a majority of shareholder backing for executive pay in 2021. US oil firms ExxonMobil and Chevron also saw shareholder revolts from climate activists last year.
Asset manager Blackrock, Exxon’s second largest shareholder, doubled its votes against executive pay proposals in the Americas in early 2021, compared to 2020.
In the UK, more than twice as many FTSE 100 companies faced shareholder revolts than in 2020, condemning executive pay-outs when many employees faced added financial hardships in the pandemic.
President Joe Biden and congressional Democrats have called for higher taxes on billionaires and big business to help pay for a major social spending package. The proposal would raise about $16 billion by limiting deductions for executive compensation.
The tax hike plan would pay for federally funded paid family leave, expanded education budgets and climate change problems.
Retentive value of package
CNN adds that ISS also has an issue with Apple, saying it does not detail whether the compensation package covers awards beyond 2021, which is a concern given “its large size.”
“Given that CEO Cook will be eligible for retirement treatment after one year from the grant date, the retentive value of the award is limited,” ISS said.
Cook’s options would continue to vest in full even after he retires, which ISS also objects to, arguing that Apple doesn’t need to give Cook this much financial incentive to stay as CEO.
Another shareholder advisory firm, Glass Lewis, has backed the proposal.
And Apple also noted in its proxy statement that Cook’s stock award is the first he’s received since he became CEO shortly before Steve Jobs died in 2011.
“It has been a remarkable decade for Apple,” the company said in the proxy statement reported by CNN.
Shareholders rarely vote against proposals that a company recommends for approval, although activists have been able to win some converts in recent years.
In 2021, investors voted against executive pay packages at Intel (INTC), General Electric (GE) and CNN owner AT&T (T).
These votes were largely symbolic, and boards are not obligated to change compensation plans even if shareholders reject them.
