Apple’s Board of Directors has modified the award of restricted stock to CEO Tim Cook that he received after being promoted to the top post in August 2011. Cook requested the modification, which changes the award of 1,000,000 restricted stock units to a more performance-based compensation system.
A restricted stock unit, or RSU, is a form of compensation valued in terms of company stock, but the stock is not issued at the time of the grant. Instead, the recipient gets shares of stock at a later date, generally only if they are still employed by the company.
According to a filing with the SEC today, the Compensation Committee of the Apple Board of Directors approved the amendment of the award from August 2011, though the amendment does not change the fair value of the grant as of the day it was rewarded.
The committee intends future stock awards to Apple executives to be performance-based, and Cook will lead by example. Normally, performance-based compensation has both an upside and downside, Cook requested his to have only the downside component.
Originally, Cook’s award would have seen him receiving 500,000 shares of Apple stock in August 2016, with another 500,000 in August 2021.
The amended package will see Cook receiving 100,000 RSU’s in August 2016, another 100,000 RSU’s in August 2021, and the remaining 800,000 RSU’s in ten equal allotments over the ten-year life of the initial award.
In order to receive the full 80,000 share award annually, Apple’s “total shareholder return” will be compared to S&P 500 companies. If Apple’s performance falls in the top third of that group, the award will vest in full for that year. If Apple is in the middle third, the award will be reduced by 25%, and will be reduced by 50% if Apple is in the bottom third.
The Form 8-K filing that Apple filed with the SEC today contains additional information about the modifications to Cook’s award.