Apple Board mods Tim Cook’s pay package to be more performance-based

According to a new filing with the SEC this afternoon, Apple’s Board of Directors has elected to modify Tim Cook’s payment package he was awarded in 2011 after being promoted to CEO. The change, which apparently came at Cook’s request, takes the one million restricted stock units he was set to receive over the next 10 years and makes the compensation more performance-based…

In the documents, Apple says that it is changing the way it divvies out bonuses in future deals with its top executives after having in-depth discussions with many of its largest shareholders. And it commends Cook for “leading this initiative by example,” saying that the CEO pushed the company’s Directors to add more risk to his pay package and that he has the “full support of the Board.”

MacRumors shares an excerpt from the filing:

“Under the adopted modification, Mr. Cook will forfeit a portion of the 2011 CEO equity award, which was previously entirely time-based, if the Company does not achieve certain performance criteria. While the Committee generally believes that a performance-based award should have both a downside and an upside component, at Mr. Cook’s request, the modification does not contain an upside opportunity for overachievement of these criteria. As a result of implementing a modification with only downside risk, the Committee has determined that a portion of the original grant should vest earlier than originally scheduled. This modification will not change the award’s original value for accounting expense purposes.”

The original award would have given Cook 500,000 shares of Apple stock in August 2016, and another 500,000 in August 2021—regardless of the company’s success. At the time the shares were granted, they would have been worth $376 million. And when Apple’s stock peaked in the fall of 2012, they were worth $705 million. Today, after a staggering 40% slide, they’re worth $413 million.

But with the new amended package, Cook will get 100,000 shares in August 2016, another 100,000 in August 2021, and the remaining 800,000 in ten equal allotments over the next 10 years. And in order for him to get the 80,000 share annual award, the Board will look at Apple’s total shareholder return and compare it to other companies. If Apple is in the top third, he gets the stock.

The details can really get confusing, but if you’d like to know more about the modifications made to Tim Cook’s pay package, you can view the full 8-K filing here. The bottom line is that Cook wants people—both Apple shareholders and employees— to know that a big chunk of his paycheck moving forward will depend on how well Apple does in their marketsand on Wall Street. Interesting.

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Tim Cook may be asked to testify in e-book pricing fixing suit

 

 

Apple CEO Tim Cook may be required to testify in an antitrust lawsuit the United States Department of Justice filed against it and major e-book publishers over an alleged price fixing of e-books. Cook’s eventual testimony might be risky and could be potentially damaging to his company, now the main target of the suit after all named publishers had settled with regulators.

On the other hand, the CEO could take the opportunity to make a public case for a so-called agency model that the government claims has had anti-competitive impact. The agency model regulates the relationship between Apple and digital content owners who get to pick their iBook prices freely as long as they agree not to offer lower pricing to competitors than they do to Apple.

Business-wise, publishers prefer Apple’s policy over Amazon’s wholesale model where the online retailer sets prices as it sees fit, often hurting publishers’ bottom line by engaging in selling books at a loss just to draw shoppers to its online store…

Bloomberg reports that Cook’s possible testimony was disclosed yesterday in a brief order by U.S. District Judge Denise Cote in Manhattan, who is overseeing the case.

 

 

In a three-sentence order, Cote set a telephone conference for March 13 after the U.S. asked her in a letter on March 6 for “assistance in settling a discovery dispute” with Cupertino, California-based Apple over Cook’s deposition. The March 6 letter wasn’t part of the publicly available court file.

As you know, DoJ alleges Apple conspired with major e-book publishers to fix prices on the iBookstore by demanding they don’t undercut iBookstore pricing on competing stores. Publishers who agreed to Apple’s policy simply raised e-book prices on Amazon, prompting DoJ to intervene and file an antitrust lawsuit in April 2012.

The government settled in September 2012 with three of the nation’s top five book publishers, HarperCollins, Simon & Schuster and Hachette. It didn’t help that the iPhone maker publicly accused Amazon of assisting the government’s agenda: last December, DoJ settled with the publisher Penguin and last month announced a similar settlement with Macmillan, leaving Apple as a lone holdout in the lawsuit.

In a prepared statement, DoJ pledged to “continue to litigate against Apple for conspiring with Macmillan and four of the other largest U.S. book publishers to raise e-book prices to consumers.”

The trial against Apple is scheduled to begin in June 2013. The European Union ended its antitrust probe into Apple’s e-book pricing terms in December 2012 after Apple had offered concessions to appease regulators.

Per fresh stats Apple released last week, the iBooks app has been downloaded 130 million times worldwide. And just last week, Apple rolled out paid e-books on its iBookstore in Japan, with popular local content including popular manga graphical novels, but also fiction, light novels and other content.

 

 

Independent analyst Horace Dediu pegged the iBooks revenue at about $1.8 billion assuming a conservative $9 average selling iBook price (many best sellers are $13 or $14) and assuming a 70 percent share for the publisher. The pie chart above shows the download rate of books relative to apps and songs.

Per Apple, it sold 130 million and 400 million iBooks as of June 2011 and October 2012, respectively. In other words, the company moved some 270 million iBooks in 16 months, amounting to an average of 17 million iBooks each month. The iBookstore has an estimated share of the worldwide e-book unit sales of about 24 percent.

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