Apple: Tim Cook is worth every penny

Some companies struggle to justify skyrocketing pay for chief executives. Apple is not one of them. Those who believe pay should be linked to performance will struggle to argue against Apple’s reward scheme. Shareholder advisory group Institutional Shareholder Services’ is wrong to suggest that investors vote against Tim Cook’s $98.7mn pay package.

ISS claims that the perks Cook receives exceed comparable companies. But Apple, a $2.8tn business with 1.8bn devices in active use globally, has no direct competitors. It is difficult to create a sensible benchmark against smaller companies.

The pay package is not a record in tech. Alphabet’s Sundar Pichai received $277mn in stock awards in 2019. Elon Musk’s moonshot 2018 pay package, linked to a series of milestones, means he could earn over $55bn.

The difference is that Cook’s pay does not all rely on future performance. But he has presided over a transformation few thought possible. Since he took over from Apple’s co-founder Steve Jobs in August 2011, annual sales have tripled. The company’s enterprise value has grown from less than $300bn to $2.7tn. 

It is true that no product issued in the Cook era compares to the success of the iPhone. But he has overseen two important and fast-growing businesses in wearables and services. Apple has also maintained its reputation for quality. This has allowed it to raise prices for high-end versions of existing products, lifting margins in the process.

Apple’s high-minded claim that business should be a force for good and Cook’s own vocal support for social justice jar with a CEO pay ratio of 1,447 times the average employee’s salary. But he has steered the company to a record market valuation and stable balance sheet. Under his leadership, it has also navigated a difficult political path with some success. Although App Store fees draw regulatory fire, its focus on privacy chimes with the priorities of lawmakers. Despite geopolitical tensions, its products remain popular in China too. Overall, Apple sales rose 33 per cent in the 2021 fiscal year to $366bn. China was responsible for nearly a fifth of the total — up from about a tenth in 2011.

How to benchmark CEO pay is a worthwhile debate. Linking remuneration to employee salaries, trailing performance or future achievements are all imperfect solutions. But Cook has demonstrated his worth. This fight is not worth having.