How Apple calculates Tim Cook’s salary

Tim Cook took home a cool $4.2 million this year, according to a regulatory filing Apple submitted to the Securities and Exchange Commission on Thursday.

Compared to the $1 annual salary Steve Jobs used to make, Cook would seem to be doing pretty well for himself. But Apple claims Cook is woefully underpaid.

Cook’s annual salary was boosted to $1.4 million this past year, and he earned all of his eligible cash bonus — 200% of his salary, or $2.8 million. When determining Cook’s pay, Apple said it considered its “financial results,  Mr. Cook’s responsibilities as CEO,” and the amount he makes compared to “CEOs at peer companies.”

Who are those peer companies? A few of the direct competitors you’d expect (Amazon, Google, Microsoft, Dell, and Hewlett-Packard), some giant tech companies (Oracle, Cisco, Intel and IBM), Apple’s wireless partners (AT&T, Verizon, and Qualcomm), and a bunch of media giants (Comcast, DirecTV, News Corp. Disney, and CNNMoney parent company Time Warner). 

In calculating Cook’s salary, Apple included more media companies in its comparison this year, adding DirecTV and Viacom, and tossing out Texas Instruments. Is Apple TV on its way? Hmmm…

Despite giving Cook a 50% raise, from $900,000 in 2011, Apple noted that its CEO’s pay “remains significantly below the median annual cash compensation level for CEOs at peer companies.”

Don’t feel too bad for Tim, though. Last year, Cook received a pay package — filled with incentives that vest in 2016 and 2021 — currently worth more than $500 million.

How much will Apple fall on Tuesday?


Chart: CNNMoney

By now you’ve heard the bad news from Apple. Steve Jobs is taking another medical leave of absence. It may be callous, but not surprising, that investors are fearing the worst. Apple, after all, has transformed itself from a niche computer company to the most important tech firm on the planet since Jobs reclaimed the CEO spot in 1997.

Shares of Apple are not trading in the U.S. because of the Martin Luther King, Jr. holiday. But over in Germany, Apple’s thinly traded stock fell nearly 8% on the Frankfurt Stock Exchange.

Shares of Apple hit an all-time high of $348.48 on Friday. Brian Marshall, an analyst with Gleacher & Co. who follows Apple, said in an e-mail that the stock probably has a floor of around $300 due to the Jobs news. That’s about 15% lower than current levels.

It will be an interesting day, to say the least, on Tuesday. Apple is due to report its latest quarterly results after the closing bell, but it seems safe to say that the focus will be more on Jobs’ health than on iPad and iPhone sales.

But investors would be wise to not lose sight of the fact that Apple is likely to report a blockbuster quarter. Sales are expected to increase more than 55%, with analysts forecasting an earning per share jump of 47%.

What’s more, Apple is being left in the more than capable hands of COO Tim Cook (who many HP investors wanted to become its new CEO following Mark Hurd’s ouster) while Jobs is on leave. That’s exactly what happened when Jobs took his last leave in 2009.

For what it’s worth, Apple investors didn’t panic too much two years ago. While the stock fell as much as 6% the day after Jobs announced his leave, shares wound up finishing that day (January 15, 2009) with only a 2% loss. Jobs returned to Apple on June 30. While he was out, Apple’s stock soared 67%.

Jobs is undeniably the heart and soul of Apple. But Cook is no slouch …. nor are the scores of many other smart engineering and marketing people that work for the company. — Paul

What’s wrong with being number two?

Stop thinking of potty jokes and Robert Wagner in the Austin Powers movies. I’m talking about Apple COO Tim Cook. Apple’s stock dropped sharply at the open Tuesday. Once the dust settled, traders started attributing the decline to speculation that Cook was going to leave Apple to take the CEO job at Hewlett-Packard.

But here’s the thing. That rumor is old. And more importantly, it doesn’t appear to be true. Gleacher & Co. tech analyst Brian Marshall told my colleague David Goldman that Cook isn’t going anywhere. Marshall later said the same thing on some little TV network called CNBC.

Of course, we won’t know for certain if Cook is merely playing it close to the vest until HP finally names its new head honcho. But I’m inclined to believe that he didn’t flat-out lie to an analyst. And that begs the following question that the people spreading the rumors should have been asking in the first place: Why on earth would Cook want to leave Apple?

Sure, as long as Steve Jobs is around, it’s unlikely that Cook has a chance of being promoted. But what’s wrong with that? Is there any shame in being the well-compensated #2 at arguably the world’s coolest company? Also, Apple’s stock has been a much better performer than HP’s lately and it seems that Apple would have a brighter future.

I get that, for some executives, leading a lesser company may be a more attractive job. There’s nothing like being the true boss. And if Cook were to leave Apple and make HP and its newly acquired Palm a true competitor to Apple in the consumer gadgets area, he’d get all the glory.

But maybe Cook isn’t cut out for that. Sometimes, it’s better to not be the proverbial “man.” Just look at the world of football for a great example. Romeo Crennel and Charlie Weis were both coordinators with the New England Patriots and parlayed their Super Bowl success in Foxboro to get head coaching jobs.

Weis went to his alma mater Notre Dame and failed to remind anyone of Lou Holtz. Or even Ty Willingham, for that matter. He was fired after five woeful years with the Irish. Crennel, meanwhile, might only be slightly more popular than LeBron James in Cleveland after leading the Browns to a 24-40 record in four seasons.

But guess what? Weis and Crennel are now both coordinators again with the Kansas City Chiefs — who after a 3-0 start are the surprise success story in the NFL so far this year. Moral of the tale for Tim Cook? It may be better to be second-in-command at a champ than the top dog at a chump.  - Paul