Apple CEO Tim Cook has asked the company’s board of directors not to issue dividends on his restricted stock units when the company pays out its planned dividends to shareholders this summer. The CEO’s request will sacrifice a nearly $75 million payout on his 1,125,000 restricted stock units.
Facing growing concerns over its immense cash balance, Apple announced in March a stock buyback and dividend of $2.65 per share to begin “sometime in the fourth quarter of its fiscal 2012, which begins on July 1, 2012.”
In an amendment filed with the SEC Friday, Apple’s compensation committee declared that the dividend would also apply to restricted stock units (RSUs), a form of compensation granted to some company employees that issues shares in the future based upon certain vesting requirements.
For example, Mr. Cook’s 2011 compensation from Apple was a $900,000 base salary plus over $376 million in restricted stock units that vest in increments over a 10-year period so long as he remains with the company. Therefore, by deciding to grant dividends on RSUs, Apple is compensating certain employees based upon future grants with requirements that the employees have not yet satisfied.
However, Apple feels that RSUs, in addition to their actual worth upon vesting, were granted with the intention of providing “equity-based incentives” for the company’s employees, as stated by the company’s SEC filing:
“As restricted stock units are not outstanding shares of common stock and thus would not otherwise be entitled to participate in such dividends,” the amendment explains, “the crediting of dividend equivalents is intended to preserve the equity-based incentives intended by the Company when the awards were granted and to treat the award holders consistently with shareholders.”
The same filing also reveals Mr. Cook’s request to forgo dividends on his RSUs:
“At Mr. Cook’s request, none of his restricted stock units will participate in dividend equivalents. Assuming a quarterly dividend of $2.65 per share over the vesting periods of his 1.125 million outstanding restricted stock units, Mr. Cook will forego approximately $75 million in dividend equivalent value.”
While Mr. Cook’s decision seems altruistic on its face, some in the financial industry believe the move is primarily motivated by a desire to avoid the type of negative press that Mr. Cook received when his compensation was revealed early this year.
[Teaser graphic via Shutterstock]