Really not sure I understand the point of this decision.
At a time when Facebook CEO Mark Zuckerberg is coming under flak for his personal gains from Facebook shares, Tim Cook has turned down a $75 million dividend on his Apple shares. It's the first time since Steve Jobs took over in 1997 that Apple are issuing shareholder dividends. And Cook has offered to forgo the dividends due to …
Really not sure I understand the point of this decision.
Most CEOs borrow against their shares to avoid tax - if he does, he'd lose most of it anyway.
Yes, we've seen so many Wall Street & City CEOs turn down extra money because they just hate paying their taxes (especially when they money-launder it in Geneva or elsewhere).
Let's just be honest. There's a vile & repulsive gene that we've seen revealed in the run-up to the Collapse in 2008, and Cook definitely doesn't have it, in his DNA. He seems to be a better man. (The kind Peal Jam seemed to be looking for.)
> Most CEOs borrow against their shares to avoid tax - if he does, he'd lose most of it anyway.
I don't follow, couldn't he take the $75 million and still not borrow against it. How exactly does this borrowing-against-shares thing work exactly?
@AC: There could well be tax implications for the $75M, certainly in the UK it would be taxed at a fairly high rate. It may well be that the remaining cash then bumps the person receiving it into a higher tax band.
All that said, I personally don't have a problem with tax. It seems to me that the society we live in needs to be funded and that the richest are able to give the most.
No information for the reason was given in the filing, but quite a few journalists have offered the following two reasons based on “sources”.
1) To avoid suggestions that Cook personally benefited from his decision to re-introduced dividend payments.
2) Setting an example about CEO remuneration, which is a bit of a hot topic at the moment.
When Cook’s remuneration package was announced, there was fair amount of comment about the number of shares he would receive, as this formed the bulk of his remuneration and which was reported to make him the highest paid CEO. One argument was that this was to get Cook to commit to Apple for a decent time and he would make a heck of a lot of money if the company did well in the long-term, rather than a package that was more short-term. That he hasn’t enriched himself even more by the dividend, I think does sidestep the above two pitfalls.
Also, since Cook became the permanent CEO, Apple has made decisions – e.g. matching employee charitable donations – that’s led to some to see Cook as being a softer, nicer baa-lamb than Jobs. Personally, I have my doubts about, but I wouldn’t be surprised if Cook is a bit more concerned about his PR than this predecessor, which might feed into this decision.
...amongst the Chinese slave labor used to generate Tim's $178 MILLION annual compensation for the year.
Greed is NOT good. And he believed it.
If greed is no good and Tim is acting ethically... why did he accept $178 Million in compensation? I suspect he did NOT suddenly grow a conscience but is more concerned about a public lynching over an additional $75 Million in (Unearned) dividends.
Well, whether it is his conscience or concern about a public lynching, he did the right the thing, didn't he? People do change their ways. I'm sure there were those who didn't think Scrooge had changed over night.
Right now I only have 2 data points. I'm going to wait for at least one more.
AC, are you basing any of your prejudice and disdain of Tim Cook on anything that occurred before January 2011, when he became acting CEO of Apple? Were you aware of his rapacious, ravenous nature before he joined Apple in 1998. Did he display that sort of behavior when he was COO?
Could it be that you really weren't aware of this flaw in his personality until "In early 2012, he was awarded compensation of 1 million shares, vesting in 2021, by Apple's Board of Directors. As of April 2012, these shares are valued at US $600 million, making him the world's highest paid CEO?"(Wikipedia)
Was accepting this remuneration which was voted by the Board a mistake or good sense? Wasn't the Board, in replacing Steve Jobs, looking for an aggressive, go-get-em-guy to take over for the deceased glorious leader?
How would it look then if the man they had chosen, this ex COO and ex acting CEO, turned to the board, like Caspar Milquetoast, and said "Oooh, that's way too much money"?
If he had said that, the Board would say: "Thank you, Mr Cook. NEXT"
...you might as well wait for Pigs to Fly if you think Tim grew a conscience. <LOL>
Whenever, during a polite conversation, my opposite hurls at me my favorite idiom, "When Pigs Fly," I immediately reconsider the position I have taken.
I have no idea who Tim Cook is except that he ran Apple when the glorious leader got sick and continued in that role after he died. Then the dividend return. Then the forum. Then this post.
I'm sure you're in a much better position to judge Cook's conscience -- or lack there of -- than I am.
So I'll defer to your greater knowledge on this subject, with the proviso that I hope you're wrong and that he has one.
Restricted Stock Units are shares he doesn't own yet. He's waiting for them to vest. Once they vest then they're no longer RSUs, they're shares in your brokerage account. When RSUs vest, that's an income event and the recipient pays income, FICA (Social Security), and Medicare tax. (Dividends are not earned income so you only pay income tax on that.)
I don't know the tax implications of receiving dividends on RSUs. Maybe none other than as income. The only thing I can think of is the question of who owns the RSUs before they vest. If the company owns the shares then the company should just keep the dividend. Ditto for dividends on everyone else's RSUs too, I'd think. If Apple is giving cash out, under the guise of paying dividends on RSUs, then yes, I can see why some people might be upset. Dividends on shares you actually own, okay – dividends on shares you've only been promised, not okay.
And I'm reasonably certain Cook would already be in the top tax bracket; additional income isn't going to push him into a higher bracket.
"Restricted stock, also known as letter stock or restricted securities, refers to stock of a company that is not fully transferable until certain conditions have been met. Upon satisfaction of those conditions, the stock becomes transferable by the person holding the award."
"One type of restricted stock is a form of compensation granted by a company. Typically, the conditions that allow the shares to be transferred are continued employment during a period of time, upon which they vest. However, those restrictions can also be some sort of performance condition, such as the company reaching earnings per share goals or financial targets." (wikipedia)
"In a Form 8-K filing today, Apple announced that it would be paying out dividends to employees with restricted stock units. It originally announced plans to pay out a dividend and institute a $45M stock buyback program in March."
"Restricted stock units are shares awarded to employees that are not allowed to be sold before a certain time has been reached."
"The payout will be to the tune of $2.65 per share to employees with RSUs, making for a hefty raise, especially for executives with large chunks of shares. Since RSUs are generally given to executives as incentives for continued employment and performance, the employees to benefit the most from this new plan will be Apple executives."
"Cook was the highest compensated CEO in 2011, with a pay package equating to $378M at the time it was awarded. However, the package consisted largely of 1 million shares of Apple stock that cannot be sold before 2016 or 2021."
Cooks shares vest in 2021, although some may vest in 2016, unless there is a performance element to some or all of Cook's shares vesting.
Cook's compensation of $378 million was based on the share price late last year; obviously it is worth more now.
The decision to pay dividends to RSU stock was probably Cook's. As was the decision not to take the dividend. Those commentors here who conflate this decision and the invasion of Poland in '39 are quite mistaken.
I'm rather more concerned with what is to happen to that lazy $75M. Where does it go? Who now "owns" it?
I'm pretty sure.
They certainly won't send it to the Chinese slaves who generated it for Tim...
"They certainly won't send it to the Chinese slaves who generated it for Tim..."
.If by 'they' you mean the Board of Directors of Apple, doesn't their fiduciary responsibility to the shareholders preclude such an act of generosity? Or maybe you were just being sarcastic. :-)
Does the BoD's responsibility include proper ethics in producing products for sale or is their world all about human exploitation?
EVERYBODY has a responsibility live an ethical life. Boards of Directors are not excepted. How many ethical people are creeping between heaven and earth right now? Some but not a lot.
As Oscar said: "We're all in the gutter, but some of us are looking at the stars."
I'm trying to be more ethical. I still duck into the alley when I see my chattering neighbor coming down the street.
Oh yes, the "Chinese slaves"..... As opposed to all the PCs being made in England and the USA by union labor. Please, tell me who is building the NON Chinese manufactured computers? I'd really like to know. I had one for a while long ago, but why bring the 20th century into this?
Never mind that the Foxconn jobs are some of the most demand jobs there are in that field. The fact that these jobs are often fought for is irrelevant I suppose.... After all, why cloud the issue with the facts? No truth is too stretchy as long as its at the expense of Apple.
And nothing of course about the other manufacturers who use the same company. Microsoft peripherals being a good example. NOBODY making computers today is innocent. Everybody wants to change things. But not if it means going back to $5000 desktops.
What utter crap.
It's only $75 Million if Apple continue to pay dividends every quarter for the next over 9 Years - since this is the first cash dividend for 17 years, what do you think are the chaces of that!
At $2.65 for 1.125 Million shares it assumed he's get dividends for the next 4 years on the 1/2Million shares that vest in 2016 and 9 years of dividends on those vesting in 2021.
So he gives up a taxable $3M on future income of nearly $700 M (1.125Million at $600/share) and is able to spin this as giving up $75!!!
If the dividend is BOTH regular (not special) and quarterly (4 quarters = $10.6 M pa), then during the life of his vesting period, it will be around ($10.60 M X 9 or 10 years) some big number.
"Assuming Apple pays quarterly dividends of $2.65 over the vesting period of Cook's shares, the company said he will give up about $75 million in value."
With around 950Million shares out there, it would cost Apple around $100Billion in dividends in order for Cook to get his $75 Million (remember 1/2 of his shares vest in 2016 and he could sell them then) . Since there cash pile is $110 Billion, sure they could afford it.. But if you were him, could you justify giving away the company 'life savings' "just" to get $10M personally per year? Far easier to give yourself a pay increase and let shareholders be happy with the buoyant price and a few 1-off dividends.
Since the $45B that they plan to spend in the next 3 years includes share buy-back and dividends, I don't see them giving away $10B annually as dividends, any more than I see them dropping margins or paying Foxconn double the contract rates.
The Chinese slaves will still live in abject poverty regardless of what the rotten Apple does with it's money because it sure ain't being used to pay decent salaries and benefits for the Chinese slaves.
How do you think Tim and a few other CEOs like Gates, Otellini, Dull etc. might fare as Chinese Foxconn slave help?