Did Apple Just Force Top Execs to Hold Stock?
Did Apple just force its top execs to hold onto a ton of stock?
Over the last few hours, many of us noticed that at the beginning of February Apple started requiring "named executives" to keep an amount of stock that's equal to three times their base salary. Board members need to keep five times their retainer, and Apple CEO Tim Cook needs to keep 10 times his salary.
Onerous? Maybe it would be for you or me. But let's take a look at the numbers.
First of all, the requirement that Cook and the directors keep stock isn't as new. It was in the proxy Apple filed the first week of the year.
What's newer is the requirement for some of Apple's other executives, which got mentioned a month later.
(Read More: Live Blog: Apple Shareholder Meeting)
Let's be clear about who's affected: Aside from Tim Cook, Apple has four "named executives": Chief Financial Officer Peter Oppenheimer, SVP Technologies Bob Mansfield, General Counsel Bruce Sewell, and SVP Operations Jeffrey Williams. Each will bring home a base salary of $875,000 this year. (That's up from $800,000 last year.) So this rule will require them to keep just over $2.6 million worth of Apple stock.
(In its proxy, Apple also lists SVP Services Eddy Cue, SVP Software Craig Federighi, SVP Hardware Dan Riccio, and SVP Marketing Phil Schiller as executives, though it's not clear whether they are subject to this requirement.)
Three times their base salary sounds like a lot, until you consider each of the "named" executives got 150,000 shares of stock worth more than $66 million in 2012 alone. And they'll get another load of about 150,000 shares in two years. So this rule requires that they hold onto less than 4% of the shares they just got. And they don't have to comply with this rule until November 2016.
Wait. Isn't this similar to the executive stock ownership proposal that shareholders just voted down this week, at Apple's recommendation? Ha! Hardly.
That shareholder proposal would have required that Apple's "senior executives" -- which sounds like a far larger group than the "named executives" above -- hold onto a third of all shares they receive. That means Apple executives would have had to keep nearly $22 million worth of the stock grant -- about ten times more than this rule requires. Not only that, it would have required that they hold onto the same percentage of every grant they ever get.
So Apple's new rule? It pushes Apple's very top execs to keep a minimal stock cushion in their accounts. But even that isn't a hard-and-fast rule. Check out the last line of the memo:
"These stock ownership guidelines may be waived or amended by the Board of Directors (or appropriate committee thereof) from time to time."
Sounds to me like Apple execs don't exactly have to sweat over this one.