Susan Estrich commentary: Tim Cook's payday
Summary: To put it most simply, Tim Cook has earned every penny he is being paid. ... Of course, an argument can be made that no one -- including the president of the United States -- "earns" $99 million for 365 days' work. Certainly, no one needs that kind of money, much less the even greater sums that some of the tech and finance billionaires have managed to accumulate.
The news that Apple CEO Tim Cook is looking at a payday of some $99 million has set tongues wagging, especially since the prestigious Institutional Shareholder Services is urging stockholders to oppose the award.
How much should one person make?
If anyone should make a fortune, it should probably be Tim Cook. There were many who said Apple could not keep up the pace of growth set by Steve Jobs. They were wrong.
Under Tim Cook's leadership, Apple has grown more than 1,000%, which only makes me wish I were a shareholder. Instead, I'm an unlikely consumer who has contributed to that growth. I remember swearing years ago that my allegiance would always be to the PC I learned on. Not so. Here I am, typing on my Mac. Why shouldn't Cook make a fortune; after all, if Apple had faltered, he would have been toast years ago.
Now, in fairness, Cook has been rewarded for that. He got one of those "moonshot" payouts that corporate America gives to the folks who defy all expectations and figuratively if not literally succeed as only rocket scientists can.
The reason CEOs make so much money is not because they start with salaries that award them tens of millions of dollars. It's because of the stock options and performance-based formulas that richly reward success. Stockholders make money, the CEO makes money. What you read about, in stories about executive compensation, are the winners whose performance earns them megabucks, not the losers whose performance costs them not only money but, in many if not most cases, their jobs.
Winners make a fortune. Losers get slammed. Capitalism is a blood sport at the top. Could it be otherwise? Should it be otherwise?
The emphasis on performance and its impact on compensation can lead some leaders to put short-term profit ahead of long-term investment. And the big payouts that come with a good year can, conceivably, lead some to leave before the piper has to be paid for a short-term strategy.
That is one reason why compensation at the top of corporate America depends not only on performance but, in many cases, on simple longevity. The average tenure of a C-suite executive is under five years. Cook has been in his job for more than a decade. He's being paid for his lengthy service to the company, for his long-term survival in a position that put a bull's-eye on his back, for the stability he has brought to the company. Why shouldn't he be rewarded for that? What's wrong with continuing to allow his benefits to vest if the 60-something CEO should retire in the future?
To put it most simply, Tim Cook has earned every penny he is being paid.
Of course, an argument can be made that no one -- including the president of the United States -- "earns" $99 million for 365 days' work. Certainly, no one needs that kind of money, much less the even greater sums that some of the tech and finance billionaires have managed to accumulate. The billionaires, Cook included, can't begin to spend it all, but they count, and care about the count, which capitalist theory recognizes and depends on. As for the rest of us, as the periodic debates on billionaire taxes make clear, there aren't enough Tim Cooks in this country to have any significant impact on how much you and I are paying in taxes. Or for Apple products.
Cut Cook's salary in half and it won't save me anything at the Apple Store. But Cook might: Apple is due to introduce lower-cost phones and tablets this spring. It's the sort of innovation we've come to expect from Tim Cook's Apple, and for which he should be fairly rewarded.
Susan Estrich can be reached at email@example.com.