The compensation committee of Apple Inc.’s board of directors has approved an amendment to the restricted stock units (RSU) awarded to CEO Tim Cook which aligns executive compensation with the company’s performance.
The new plan could cause Cook to forfeit about US$2.9 million worth of stocks this August based recent price of Apple (NASDAQ: AAPL) shares. Over the next nine years, the amendment could cost him US$135 million, according to a report by Computerworld.com.
The new plan effective June 21, amends the RSU awarded to Cook in August 24, 2011.
The amendment “reflects the committee’s intent to have a portion of future equity awards be performance-based for company executives, and for Mr. Cook to lead by example,” according to Apple’s filing before the United States Securities and Exchange Commission.
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Restricted share units are not awarded at the time of the grant but given when they vest. The shares will then be worth their current price. Cook’s RSUs were granted August 24, 2011 when he was promoted CEO a few weeks before the death of Apple co-founder Steve Jobs.
The compensation committee said it will use a criteria called total shareholder return (TSR) which combines share price appreciation and dividends.
If Apple is within the top third of the Standard & Poor’s 500 in TSR, Cook stands to get all the RSUs scheduled to vest that year. If Apple is in the middle bottom third, Cook will get only ¾ or ½ respectively of the RSUs.
If Apple remains at the bottom third for each year through 2021, Cook, could lose 327,123 shares which at Friday’s close are valued at $135.5 million.