Four of the five highest-paid employees at Standard & Poor’s 500 companies aren’t chief executive officers. They’re Apple Inc. (AAPL) senior lieutenants receiving compensation packages designed to keep management intact in an increasingly competitive industry.
The four executives are Bob Mansfield, Bruce Sewell, Jeffrey Williams and Peter Oppenheimer, according to fiscal 2012 compensation figures for top earners filed with the U.S. Securities and Exchange Commission. About 80 percent of S&P 500 companies had submitted their numbers as of April 12.
Last year was the second in a row that payouts at Cupertino, California-based Apple ranked among the most generous. Apple directors, who put CEO Tim Cook at the top of the heap last year, are using compensation to keep the team that transformed the iPhone maker into the most valuable technology company under co-founder Steve Jobs, who died in 2011. The urgency has increased in recent months as Samsung Electronics Co. and Google Inc. challenge Apple.
“It’s a retention strategy to keep the key executives who were present in the Steve Jobs era,” said Greg Sterling, an analyst at San Francisco-based Opus Research. “They want to be sure the actual talents that they bring to the company are retained, and also from a perception standpoint to retain confidence in the leadership.”
Pay Disclosures
Apple’s Mansfield received $85.5 million, almost entirely in stock, the second-largest 2012 compensation package in the S&P 500. The total was boosted by the value of a related accounting charge and options that vested earlier than other Apple executives. Mansfield’s base salary was $805,400, matching that for Oppenheimer, Sewell and Williams. Their pay jumped after receiving 150,000 in restricted stock units shortly after Jobs passed away.
Steve Dowling, a spokesman for Apple, declined to comment on compensation. In its regulatory filing, Apple’s board said the stock grants should be “meaningful in size in order to retain the company’s executive team during the CEO transition.”
The pay-package data compiled by Bloomberg include base salary, bonus, equity and other benefits for the 2012 fiscal year, which in Apple’s case ended in September. Bloomberg’s ranking includes figures filed with the U.S. Securities and Exchange Commission for 2,050 executives at 410 companies.
Andrea Jung, senior adviser at Avon Products Inc., chairs Apple’s compensation committee, which also includes J. Crew Group Inc. CEO Mickey Drexler and former U.S. Vice President Al Gore. Drexler declined to comment on the board’s pay strategy, while Jung and Gore didn’t respond to requests for comment.
Post-Jobs Success
Mansfield, who had led Apple’s hardware engineering group, had announced plans to retire last June, then was persuaded to reverse course after members of his team complained to Cook about his replacement, Dan Riccio, whom they believed was unprepared for the magnitude of the role, people familiar with the events said in October.
“What the board is doing here is saying we’re going to give you millions of dollars worth of reasons to stick with Apple, see us through this transition and to make sure we continue to be successful without Steve Jobs,” said Allan McCall, a Stanford University researcher who is studying executive compensation.
Apple executives who became enriched as the stock surged under Jobs might have been tempted to leave, their wealth intact, in the wake of his death and the passing of the reins to Cook, said McCall, who also co-founded compensation advisory firm Compensia Inc.
Top Deputies
Mansfield, 52, joined Apple in 1999 and now is senior vice president of technologies, leading development of semiconductor and wireless products.
Sewell, 54, Apple’s lead lawyer, received a package worth $69 million, ranking him third in the S&P 500. Sewell, a former Intel Corp. (INTC) executive, has spearheaded Apple’s patent infringement lawsuits, including the $1.05 billion verdict it won against Samsung Electronics last year. A federal judge last month reduced the award by $450.5 million, ordering a new trial on damages for some products.
Williams, 49, senior vice president of operations, came in fourth at $68.7 million. He has assumed many of Cook’s former duties, including responsibility for Apple’s supply chain and its relationship with manufacturing partners such as Foxconn Technology Co. (2354)
Restricted Stock
Apple Chief Financial Officer Oppenheimer, 50, who has been guiding the company’s strategy for handling its $137.1 billion in cash and investments, received $68.6 million in total compensation last year, for fifth place. Oppenheimer’s total pay included a $805,400 salary, stock awards worth $66.2 million, a $1.6 million bonus and other benefits valued at about $16,000, according to Apple’s SEC filing.
The four earned more than Cook, who ranked 1,016 with a $4.17 million package. Cook, 52, received $378 million for 2011, nearly all in restricted stock awards set to vest over a decade, and was the highest-paid CEO that year.
Apple’s top-four earners trail only Oracle Corp. (ORCL) CEO Larry Ellison, whose compensation was $96.2 million last year, based on corporate filings to date. Apple in December disclosed payouts for its 2012 fiscal year. Filings from other S&P 500 members show the premium Apple is paying relative to its peers.
The data compiled by Bloomberg only includes executives whose total compensation was disclosed in annual proxy filings. It doesn’t include Apple’s marketing chief Phil Schiller, who was given 150,000 restricted stock units, and head of Internet services Eddy Cue, who got 100,000.
Microsoft, Hewlett-Packard
The 2012 compensation top 10 includes two other executives at Redwood City, California-based Oracle, which gave co- presidents Mark Hurd and Safra Catz about $51.7 million apiece. Rounding out the list are CBS Corp. (CBS) CEO Les Moonves, Discovery Communications Inc. (DISCA) CEO David Zaslav and Occidental Petroleum Corp. (OXY) Chairman Ray Irani.
Under Moonves, CBS “posted record results in 2012, with its highest revenues, operating income, and EPS since it became a standalone company in ’06,” the company said in a statement. Representatives from Oracle, Discovery and Occidental declined to comment.
Including Cook, Apple’s top five executives had a combined compensation of $296 million, the top among S&P 500 companies, while Oracle was second with $253 million. The top five at CBS earned $120.7 million, while those at Discovery Communications made $65.3 million.
Apple executives earned several times more than other well- known technology-industry CEOs. Microsoft Corp. (MSFT) CEO Steve Ballmer received a package worth $1.32 million in the 2012 fiscal year, which ended in June, while Hewlett-Packard Co. (HPQ) rewarded CEO Meg Whitman with compensation of $15.4 million for that fiscal year, which ended in October.
Vesting Schedule
Apple’s compensation totals are for the fiscal year that ended in September, a period when shares increased 65 percent. Since then, the stock has fallen 35 percent. Apple declined 1 percent to $429.80 at the close in New York on April 12.
The recent slump doesn’t affect the reported 2012 payouts because stock-based compensation was valued based on the price in November 2011, when shares were trading at about $400. The amounts executives are ultimately paid will depend on the stock price when they sell batches of restricted shares, which vest this year and in 2016.
Jobs earned a $1 salary each year he was CEO, though stock grants swelled his total payout.
Since Jobs relinquished control, the only senior executive to leave voluntarily has been retail head Ron Johnson, who served as CEO at J.C. Penney Co. until his ouster this month. Two others, mobile-software head Scott Forstall and Johnson’s successor John Browett, departed under Cook’s management shakeup in October 2012.
Apple’s strategy appears to be working, since there has been scant turnover, according to Steven Hall, founder of Steven Hall & Partners LLC, a New York-based executive-compensation consulting firm.
“Obviously, they are doing something right,” Hall said.
Source:Bloomberg
