Apple’s Tim Cook Is a Steal at $65 Million in PayCaleb Melby
Apple Inc.’s Tim Cook has the best pay-for-performance rating of any chief executive officer on the Bloomberg Pay Index, the first daily ranking of the highest-paid U.S. executives.
Cook was awarded $65.2 million in compensation last year. During the three fiscal years he has run Apple, revenue climbed 69 percent to $183 billion and net income grew 53 percent to $39.5 billion. Sales of iPhones more than doubled to $102 billion.
“Apple is just unbelievably killing it,” said Dan Ernst, an analyst at Hudson Square Research in New York. “A good leader like Cook builds a team around him that can do the job.”
The 54-year-old’s awarded pay package, which makes him the 17th-highest paid U.S. executive, is dwarfed by Apple’s three-year average economic profit of $28.6 billion, the index shows.
The pay-for-performance measure used in the Bloomberg ranking is calculated using an executive’s pay as a percentage of a company’s economic profit, which is defined as after-tax net operating profit minus its cost of capital. Cook’s pay is 0.2 percent of economic profit, the smallest fraction of any CEO in the ranking, showing that investors are getting a better return on each dollar they pay Cook.
Apple gave Cook $9.2 million last year, including a salary of $1.8 million, a $6.7 million bonus and $699,133 for security, according to the summary compensation table in its proxy filed in January. That figure doesn’t include 80,000 restricted stock units granted to him in August 2011 that were meant to compensate him for 2014. Following a seven-for-one stock split in June, Cook’s 560,000 restricted shares were valued at $56 million at the end of the company’s fiscal year in September.
Josh Rosenstock, a spokesman for Apple, wouldn’t comment for this story.
The Bloomberg Pay Index tracks the 100 highest-paid executives, regardless of title, that appear in regulatory filings for companies that trade on U.S. exchanges. Each executive’s pay package is updated every business day as fluctuations in stock prices change the value of their equity awards.
The ranking was published April 16 with the release of pay profile pages for more than 350 executives on the Bloomberg Professional service. Each profile features an analysis of how much an executive can potentially earn and how his or her pay-for-performance is calculated.
Satya Nadella, who became CEO of Microsoft Corp. in February 2014, ranks as the second best deal for investors. The $43.5 million that the world’s biggest software maker awarded him last year is equal to 0.4 percent of its $12.1 billion economic profit.
Tony Imperati, a spokesman for Microsoft, disputes Bloomberg’s valuation. The computer maker considers a $13.5 million one-time retention stock grant to Nadella as an award that should be annualized. The index doesn’t annualize one time sign-on and retention awards because they’re not part of companies’ regular performance compensation plans.
Exxon Mobil Corp.’s Rex Tillerson is the third-best deal for investors and Coca-Cola Co.’s Muhtar Kent ranks fourth. Tillerson’s $32.3 million pay is 0.7 percent of his company’s $4.8 billion three-year average economic profit.
Coca-Cola’s pay practices became the target of an investor campaign that drew comment from Warren Buffett last April. The company put in place new guidelines for issuing equity to executives in October, which the world’s third-richest man later praised. The soda maker awarded CEO Kent $33.8 million in 2014, or 1.2 percent of its $2.8 billion economic profit.
Qualcomm Inc., the world’s largest maker of chips used in mobile phones, granted CEO Steven Mollenkopf $37.1 million. The pay was part of a series of “aggressive retention-related compensation actions for key talent” after competitors tried to recruit members of its management, the company said in its proxy statement. His pay is equal to 1.7 percent of Qualcomm’s $2.1 billion three-year average economic profit.
Larry Ellison, the billionaire founder of Oracle Corp. who was paid more than $100 million last year, ranks 6th. His pay is equal to 2.1 percent of the software maker’s $4.8 billion economic profit.
Thirty-six of the CEOs in the ranking lead companies that had negative three-year average economic profit, meaning their companies aren’t producing enough profit to cover their cost of capital.