Apple has tied Chief Executive Tim Cook into Steve Jobs’ boots – albeit at a high price. The maker of functional but expensive gadgets now has a $376 million CEO retention plan to match. Cook deserves much after standing in for Jobs, and Apple needs continuity. But in future the board can pay Cook a bit more like the company’s late co-founder.
As the board admitted, the award to Cook – a tidy 1 million restricted shares – was essentially plucked out of the air. Yet it would be hard to reason a way to a number. Cook ably replaced the ailing Jobs on three occasions before eventually becoming CEO. While running the near-$400 billion Apple is probably the most exciting job in tech, Silicon Valley rivals would love to get their hands on Cook. And with Jobs gone, the company needs to hold onto his top lieutenants, among them Cook and Jonathan Ive, the newly-knighted British chief designer.
Cook’s award – already worth almost $50 million more than the official figure, which uses Apple’s share price last August – isn’t only hefty, it also serves its purpose. Half of the stock vests in five years’ time, the other half in 10 years. And Cook will lose unvested shares if he leaves the company for any reason except death or disability.
Yet from now on, the board doesn’t need to pay Cook over the odds. Consider Jobs’ pay history. Apple gave him 20 million options and a $90 million Gulfstream jet in 2000. They would be worth about $16 billion to his heirs now, had he not exchanged them – along with a lesser batch of options received in 2002 – for a smaller quantity of restricted stock in 2003.
Critics thought the 2000 grant, in particular, excessive. Other than the two sets of options, however, Jobs received only $1 a year for more than a decade. The board can justify a higher annual sum for Cook, if he can help sustain the trajectory that made Apple the most valuable company in the world briefly last August and brought an all-time high share price during Monday’s trading. But the grant is designed to lock in the CEO’s services, and the company shouldn’t need to pay up again.