Due to lack of a major overhaul in features, Apple’s iPhone sales have been slumping for the past couple of years. And the Cupertino giant is today revealing that it has missed on its own internal sales and performance targets for the first time since 2009. This, in turn, leads to some reductions in the annual salary as defined by the company’s performance-based compensation system.
According to a regulatory filing, Apple miscalculated the consumer’s need for a brand new iPhone 6S lineup that was released in 2015. Thus, the company fell short on its internal revenue and operating income targets by 3.7 percent and 0.5 percent respectively. The annual sales of the company add up to $215.6 billion whereas the operating income stands at $60 billion for the period ending in September’16.
The significant drop in numbers is, however, overshadowed by the company’s compensation policy which slashed a massive 15 percent from CEO Tim Cook’s annual salary. This means Cook received an annual payout of more than $8.75 million in 2016 as compared to $10.3 billion that he should’ve received at his position. The compensation for this fiscal year is even less when compared to his $9.3 million pay in 2014.
The reduction in annual payout doesn’t reflect the 1.26 million Apple shares he was awarded this year, whose total value stands at over $135 million at the time of disclosure. He has amassed a massive amount of shares, courtesy of his five-year long tenure at the helm of the largest tech behemoth.
While Cook has faced the harsh reality of the slumping sales with a massive 15 percent reduction, other top-tier executives have faced similar consequences as well. For the current year, the compensation for these employees decreased by an average 9.5 percent. But Apple’s Senior VP of Retail Angela Ahrendts still managed to rake in a monstrous $22.9 million in 2016 to secure the title of ‘top executive earner.’
Talking about the same, the regulatory filing reads,
Our 2016 performance with respect to net sales and operating income was 7.7% and 15.7% below our record-breaking 2015 levels; however, the 2016 payouts to our named executive officers were significantly less than the annual cash incentive payouts for 2015, reflecting strong pay-for-performance alignment.
This can be seen as the penalty for missing their own forecasts and it now pressurizes the top-tier executives to deliver better results with the next product release. Apple might now be banking on the sales of its recent iPhone 7 lineup release as well as the upcoming iPhone 8 – which is also the 10th Anniversary edition of the smartphone. It is expected to introduce some major features and design overhauls, which can lead to bombastic sales and an uptick in Cook’s salary once again.