Think of the biggest tech company and chances are the first name that pops in your head would be Apple. Or perhaps Google. With a market capitalization of whopping $879 billion dollars, a cult-like fan following, extremely popular products, Apple is truly crème de la crème of Silicon Valley.
Yet, peculiarly the world’s most valuable company doesn’t make the cut when it comes to the ‘billionaires’ club’. Going by the Bloomberg Pay Index – which ranks the top-paid senior executives at public US companies – Apple surprisingly doesn’t figure prominently. Apple chairman Art Levinson is the only one who makes the list. And as the Bloomberg Pay Index notes, “his Apple stock accounts for just 20 per cent of his $1 billion fortune”. Levinson, for the record, has an early stake in Google and also served as chairman and CEO at Genentech Inc.
What might come as a surprise is that Apple CEO Tim Cook has earnings of ‘only’ $600 million. The disparity between revenue and compensation to executives seems startling to say the least. So, how does the most valuable company in the world produce so few billionaires?
Cook reportedly takes home $3 million in salary and also has a $6 million target bonus. His other major source of compensation comes from a restricted stock of $376 million which he got when he replaced Steve Jobs in 2011. This restricted stock was also supposed to pay him for 10 years.
Apple has a unique model which is based on the stringent fact that Apple the company has to outperform the S&P 500 Index. It is this criterion which makes Apple different from all the other tech biggies. As expected, the S&P 500 Index accounts for almost 10 per cent of the wealth generated by these top tech companies. According to the Bloomberg report, “about one third of the grant is contingent on Apple outperforming the S&P 500 Index.”
Compare it with other big companies like Google, Tesla, Facebook or even Oracle and you will see a stark difference. Elon Musk was recently in news for getting a pay package of $2.6 billion. Even Google is known to give biennial stock grants to its top-level executives.
It’s not just compensation where Apple remains low-profile. Apple is cautious when it comes to acquisitions as well. Till date, it’s record deal remains the $3 billion it spent to acquire Beats Electronics in 2014. Facebook, on the other hand, acquired WhatsApp for $22 billion in the same year.
In Walter Issacson’s comprehensive biography of Jobs, it is mentioned that he sold all of his shares – except one – in 1985 for $100 million. Jobs was unceremoniously removed from the company and had held a 15 per cent stake in 1980 at the time of the Apple’s IPO. Guess how much would that be worth today? An eye-popping figure of $132 billion!