It always seems like earning nearly consistent profits is under appreciated, whereas revenue and profit growth (unlimited) are seen as the best markers for valuing companies. Apple has generally had very good profits (which also seems enormous in comparison to many other tech companies). While Tim Cook could do a lot better on getting the company to improve the quality of its products (especially software) and reducing efforts on slowly sliding into targeted advertising and tracking — both of which erode consumer confidence and could have a negative effect on the money Apple makes — he’s done quite well in keeping Apple mint a lot of money every quarter (I seem to recall “record breaking quarter” multiple times over the years).
I’m curious to know what kind of pay cuts the CEOs of Meta, Tesla, Amazon, Netflix, Uber and other (tech and non-tech) companies are taking. Not just cuts in base pay, which is usually a paltry sum, but bonuses and other compensation.
That's one of the beautiful things about share-based compensation (from a shareholder angle).
When the share price falls, the CEO and other executives take an automatic pay cut that's pretty directly linked to that (linear in the case of RSUs, superlinear in the case of options).
On the surface, it's of course "fair" that compensation be tied to performance.
The problem is that we're talking about an ASTRONOMICAL sum of money when it comes to people like Tim Cook. After the 50% pay cut, he's still making $49 million. Beyond a certain level of wealth, the numerical value of one's compensation becomes effectively meaningless. It's just theater for him to say he's taking a "pay cut".
>Beyond a certain level of wealth, the numerical value of one's compensation becomes effectively meaningless.
Depends on your lifestyle inflation. Even for the high earners in the US, 49 million per year is FIRE money, but if you're used to the life of an oil sheikh with luxury clothing, jewelry, art, exotic private parties, dozens of rare supercars, private jets and yachts, McMansions/penthouses in London, Paris, Geneva, NY, Tokyo, etc., some private island where it's nice and warm, and also want to leave a similar lifestyle for your kids and their kids and their kids' kids, then 49 million per year is basically poverty money.
Using a 3% withdrawal rate, $49m let's you safely live off $1.47m per year, far above what "high earners" are even earning. And that's just a flat $49m. You are saying $49m per year. That's a fucking ludicrous amount of money. Even if your hobby is dropping Bugattis off cliffs you won't exhaust that much income.
You'd think a quote like this, pulled out of context, would change its meaning once seen in context. It doesn't.
There's a vast difference between not being able to afford an absurd lifestyle of consumption and extravagance and being able to eat.
Someone's who's salary is cut from $100M a year to $49M a year, no matter how insane their spending was, isn't going to suffer.
If it's not clear: someone having to choose to buy a Ferrari instead of a Bugatti because of a pay cut is not the same as someone having to choose between shelter or food because of a pay cut.
check out the European Nobility for about 500 years, before the Napoleonic-era for conspicuous consumption. (some of the modern sports-moguls lack taste, from my chair). Of course, that EU Feudal system was powered by serf labor and oversea Imperialism.. think of serfdom as similar to an AWS job with a difficult boss, but with the serfs had more job security.
> That's one of the beautiful things about share-based compensation (from a shareholder angle).
The problem with shares is that they have become (or maybe have always been) a purely speculative asset. They rarely reflect the reality, and are always expected to just rise rise rise in price. Even if literally nothing changes, the company remains stable and profitable, the shares will take a dive because continuous unlimited growth is always expected.
Huh? How do dividends depend on “stock to go up up up”? That’s opposite of my experience. How does EPS have anything to do with stock price? I think you have it all backwards.
Stock PICKing is speculative because we can’t predict the future. But that doesn’t mean that the future is unhinged from underlying fundamentals.
super linear how? comp is still a fixed number of options, no? other than clawbacks or threshold function awards, which i don't think we're talking about here.
If you have 10K RSUs and the shares are worth $100, they are worth $1M right now. If the shares then go down by 10%, your RSUs went down by 10% (are worth $900K).
If you have options on 50K of those same shares at a strike of $80, the options are in the money by that same $1M. If the shares go down by 10%, the in-the-money amount falls by 50% (to $500K) rather than by 10% (to 900K).
Apple would be so much better if they didn't have to chase extra services revenue.
They don't have to overcharge for App Store services, and have anti-competitive rules like forbidding developers from even showing price breakdown to the customer paying for this or having lower prices on other platforms. They don't have to have "you're not allowed to compete with the iOS" rule in the App Store. They don't have to push users towards Apple Music, Apple Maps, and Apple TV by limiting APIs for third parties (and fame it as it's either Apple favoritism or straight up malware dichotomy). They don't have to expand advertising …except every quarter they must squeeze more money out of users, and they've run out of places where they can do that without degrading user experience and doing asshole moves.
This. All these tech companies have reached saturation, but at the same time they are profitable. I guess investors want upward returns because they expect more money than they put in.
I think this is a case where mature tech companies (ie: FAANG/MS/etc.) should look at paying dividends rather than relying on solely on stock growth. But paying dividends is a whole different, tax-disadvantaged mess compared to pure growth, so there needs to be some tax and regulatory adjustments.
What difference does it make from a shareholder perspective if a business pays dividends or does share buybacks, other than the fact that share buybacks defer tax liability?
Shareholders are the ones pushing ads and poor quality products. They see what windows OEM's and Android are getting away with and are jealous that Apple isn't doing the same with their power. All they care about is maximum money, that's what all their reports and statistics is based on. For apple to overcome this this need to remove the board, go private.
It seems reasonable to interpret “giving away one’s wealth before dying” to mean that they have a goal to not pass on a significant portion of their wealth to heirs, but rather donate it prior to succumbing to old age.
Obviously, it is what it is if one were to die unexpectedly, but that is an obvious caveat that does not need a disclaimer.
If it's so obvious maybe it should be obvious that my comment pertains to the fact that if you want to give away your money, give it away. If you're telling people you're giving it away in the future you're just trying to live your whole life getting accolades without actually doing the thing you get accolades for. And then you might even die and not have done it.
Keeping the money isn't necessary as unphilanthropic as you seem to imply.
Wealth doesn't typically sit under the mattress doing nothing. While the person is alive, they can control how that wealth is invested, and do good that way. Giving it away while still alive would take it out of their control, and perhaps they think that keeping control will do better from a philanthropic perspective.
That is not the argument. People can keep their money all they want. The annoyance is with trying to get accolades for something they haven't done. It's like me going around saying how in 5 years I'll quit my job and become a pauper that dedicates their life to volunteering.
How would you give away that much money so it has a lasting impact? Lump sum would be risky. You would diversify and do it over time. And he is indeed giving it away. Just quietly.
MacRumors reveals that Cook last week donated 10,715 shares to an undisclosed charity. As of the date of the transaction, August 20, 2020 that would put their value at a little over $5M. The gain in value since then means that the shares were worth almost $5.4M as of yesterday’s close.
Cook revealed in 2015 that he plans to give away all of his wealth during his lifetime.
Cook says that he has already begun donating money quietly, but that he plans to take time to develop a systematic approach to philanthropy rather than simply writing checks.
He regularly donates AAPL shares to undisclosed charities.
> If you're telling people you're giving it away in the future you're just trying to live your whole life getting accolades without actually doing the thing you get accolades for.
Another possibility is they are encouraging others to make the same commitment.
My prediction is the donation from the Patagonia founder (whose name I have already forgotten) will be written about fewer than 10 times in significant distribution in the two decades from 2025 to 2044. Whereas the giving pledge type of billionaires will be written about more than annually on a per capita basis.
It's the same reason I think that politicians are reluctant to quickly deliver on their promises. Because those promises represent pain points which represent the power to get them (and their party) elected in the next election as well. That power goes away if the pain point is solved.
The alternative is you could give it away early, get some recognition for a bit, and then after a year or two people have forgotten or don’t give a shit and you have nothing.
Honest question: I've seen a lot of billionaires make a similar pledge. Are there any dead billionaires we can see as examples of keeping good on a pledge like this?
These billionaires pledging to give away their money before they die is just a big slap in the face to everyone else. It’s virtue signaling because these same people do everything they can to pay as little tax as possible and various other aggressive financial tactics for themselves and their companies.
So instead of promoting redistribution of wealth while they’re alive, they make sure they get all the power, status, influence, and benefits of their wealth, and only once they’re dead or near it do they plan on giving it away.
Chuck Feeney is the only one I've ever heard of. Note though that he is still alive and famously did not make a public pledge, but tried to give everything away anonymously. The type of person that would make a public pledge does not seem like the type of person who will actually give all their money away.
The people that are most famous for pledging to give it all away — Gates, Buffet — are far far richer than they were when the hoi polloi started reading public relations articles about their philanthropic pledge.
Well... that's part of the irony really, in that when you are as rich as Crassus, it's actually work to try to divest it. What seems to really happen is that money moves from the family to a separate foundation, and then the foundation has the work in perpetuity of managing and granting out the money. With that much money, families really are set up through the end of time, assuming they have any degree of management and responsibility over the bit they don't put into a foundation.
It's work, but it's not like a lifetime of work. MacKenzie Scott has managed to donate $14 billion in her first three years of being a professional philanthropist. If you actually want to give your billions away you can pay some people to help you do it relatively quickly. There doesn't need to be a perpetual foundation unless you want there to be.
Gates has given away about $60 billion so far. His net worth today is about $103 billion. So he's given away over half. How is that a scam? Especially for the charities that benefited and presumably are doing good work for those who need it the most.
Yeah, just scan through the list of names on The Giving Pledge Wikipedia page (https://en.wikipedia.org/wiki/The_Giving_Pledge), which helpfully lists their net wealth so you can see their failure at a glance.
Also note that the pledge is only to give away "at least half" which is pretty unambitious for a multi-billionaire. If you have $10 billion and give away $5 billion, you've made no impact on your own life and sacrificed nothing. It is not comparable to someone with $100,000 giving away $50,000.
A lot of funny business happens even when they do, such as charities ran by their kids who get high paying executive roles, or non-profits that do a lot of curious things on behalf of for-profit companies.
How is that impressive? Right now he has the potential to earn, and invest, 10's of millions of dollars that he can give away. Probably even make a self-sustaining endowment that can benefit people for many many years.
"pledge" means nothing. It's the word you use when you want credit for something you haven't done. He hadn't even done anything as simple as put the money in a Donor Advised Fund or foundation.
> Cook’s annual base salary and bonus will remain unchanged at $3m and $6m respectively. But the “targeted” amount he will be given in share-based bonuses will fall from $75m last year to $40m this coming year.
Not a smaller base salary, or performance related bonus (which is seemingly guaranteed), but a smaller extra bonus bonus.
His $40mil of shares next year will probably be the same number of shares he received last year for $75mil anyway.
What difference does it make which bucket it falls into? Adding up your numbers, it's a 42% pay cut either way, which is huge. If your "extra bonus bonus" is the majority of your compensation by far, then it's the main thing that matters. (It's wouldn't even be possible to cut his main salary/bonus by that much, since the cut is larger than both of them combined.)
Also the number of shares is irrelevant, only their value when issued. And Apple's stock is currently only about 10% less than its average over the last year (from a rough eyeballing), so no, it wouldn't be the same number of shares anyways.
> ... it's a 42% pay cut either way, which is huge.
It's really not huge.
He's worth north of $1b (USD), so his 'pay' is ~4% of his wealth - compare that to yourself / any other human you know.
For a 62yo to churn through $1,500,000,000 (and interest earned on same) before they die will take some serious effort, but negligibly different effort than the $1,550,000,000 this story implies he'll have to contend with in a year.
At his wealth level (1.7 billion) I doubt he works for the paycheck. Even his non-Apple-stock and tangible wealth would be enough to live for 50 lifetimes.
If he was so inclined he could just call it quits after the cut out of spite, and hit those shareholders with a stock nosedive over the uncertainty and signalling of his departure. Of course his Apple stock would take a dive too, but it will be worth the fun!
It’s neat to see a high profile case of Say on Pay (from Dodd Frank) actually working in the wild.
It’s an advisory vote, so the company doesn’t have any legal obligation to act on it. But it forces the company to take a straw poll and share the results, which can be enough to nudge them into acting on it, even when only ~35% disapprove.
I don't understand people who are motivated by making money that is beyond the amount of money that they would need to buy a nice house and feed themselves well. Ten million dollars seems to me like enough money to immediately retire on. I just don't get it. If I were Tim Cook and I enjoyed my job then I would just take a salary of $1/year and not worry about it.
> making money that is beyond the amount of money that they would need to buy a nice house and feed themselves well.
What if he has a cause that he's working toward? Like he's donating X million every year toward Y disease cure? Because maybe he has a cousin or something with the affliction or some other personal reason. This is exactly what Bill Gates is working on with Malaria
If he had such a cause, then this wouldn't be a "what if" question.
woooo, I can play the what if game too: What if Billionaires gave their money to the gov't as part of taxes like the rest of us?
What if the gov't did that, since they're better situated to finding and distributing the right resources to the right people than a random billionaire is at just "fixing disease". (Not saying they're good at this, just that they're better at acting in the interests of the people than "pick a billionaire from a hat to save us all")
I'm saying it doesn't matter if Tim Cook has a cause, because he's probably not very good at helping that cause.
Which is a direct response to your original point which was an absurd hypothetical about how Tim Cook should be allowed to make as much money as he wants, cause what if he maybe ends up doing some good for society. I agree with the original point that people don't really need much more than a living wage...
I'm saying that it's absurd to pray for Billionaires to do good for the rest of us, when we could just tax them, and make them do it. That's where the gov't comes in.
> Which is a direct response to your original point which was an absurd hypothetical about how Tim Cook should be allowed to make as much money as he wants
Dude you’re so deep in your own mind hole. Read the post again to see that no such point was ever raised.
OP “I can’t see why anyone would do this” and I tried to help add a perspective so that they might be able to get a little bit more from the world, as if lending a magnifying glass. It was a question and answer about human motivation, not govt policy.
At no point do I assert that someone -should- do something or that some position is morally justified over others.
You might consider that you get into ~200% more arguments than you actually should and your combativeness turns would-be allies into enemies.
You don't say that he 'should' do anything. But you're providing a purely hypothetical example of what someone might do with their money if they were allowed to continue making money beyond the amount of money that they would need to buy a nice house and feed themselves well.
You're providing a justification for why someone would need more money. Why would you do that, if you don't believe that they should be able to do that? This is such an obnoxious level of not sticking to a reasonable interpretation of what you said.
I know you didn't say the word 'should', but if you don't see that you providing a defense (in the form of a case for why they should need more money than what the original commenter stated) of billionaires reads as you cosigning why they should be allowed to make billions, then maybe, legitimately, you should take an English literature class? Like, this reads as pretty Gas-Lighting behavior to me. I'm not responding to things you didn't write.
I don't buy this line of reasoning -- if you have $10 million then you can just go to the front lines yourself and fight malaria directly. The idea that you're going to make a lot of money so that you can pay other people to live a good life in your place just doesn't cut it.
You think he can just flip a switch from American businessman to becoming a PhD level biologist and epidemiologist and be actually effective at getting anything done?
He's funding the work of experts in the field who have dedicated their lives so that the solution can actually be advanced.
If you are trying to actually rid the world of malaria, do you think washing the feet of the poor is the best way to do that? Like, I'm not saying that it's not a noble job, or that it doesn't need to be done, but how does it get you closer to preventing malaria? How many feet need to be washed before malaria disappears?
You're confusing treatment (make people feel better while sick) with cure (make it actually go away forever)
That's not even the point. When the Fed prints money, it pushes stocks up. CEO has done nothing. When the Fed raises rates, it pushes stocks down. CEO has done nothing.
Not saying Apple is worthless but a lot of the rise in price of the past two years had nothing to do with the CEO's actions as for every other stocks.
And I assumed you were talking about Apple being a large part of the S&P 500 (and therefore if "stocks go up", it's largely because Apple's stock price goes up). We were talking at cross purposes!
That was the salary if I recall, he did took share bonus. Which back then was seen as a risky move because many believed than Apple couldn't avoid bankruptcy.
I’m curious to know what kind of pay cuts the CEOs of Meta, Tesla, Amazon, Netflix, Uber and other (tech and non-tech) companies are taking. Not just cuts in base pay, which is usually a paltry sum, but bonuses and other compensation.