Apple(s AAPL) revealed Friday afternoon that it is changing the way CEO Tim Cook will receive his stock options that are part of his executive pay package.
In a document filed with the SEC, Apple’s board of directors says it has approved a change, effective Friday, that will mean some of Cook’s current and future stock awards will vest based on company performance, not just his time served as CEO — as had been the company’s tradition. The change is retroactive and will apply to the 1 million stock units granted to him when he was named CEO in August 2011.
The filing reads:
In outreach discussions this year with many of our largest shareholders, we heard that they believe it is appropriate to attach performance criteria to a portion of our future executive stock awards that have been entirely time-based (i.e., vesting for continued service) in the past. We agree and, beginning today, the Company will include a performance element in new stock awards to our executive officers.
Apple said Cook asked to alter his compensation in this fashion.
Performance grading will only be applied to half of the units per vesting cycle. The metric used to gauge Apple’s success will be “total shareholder return.” The move is intended to “align Mr. Cook’s potential realizable compensation from the award with Company performance, and reflects the Committee’s intent to have a portion of future equity awards be performance-based for the Company’s executive officers, and for Mr. Cook to lead by example.”
The change comes months after Apple’s stock began a precipitous loss in value. The company’s shares have lost 42 percent of their value since last fall. The stock was at $373 when he took over, peaked at $702 in September 2012 and on Friday closed at $413.50.