Apple's Proxy Unveils a Measured Approach to Severance for a New Hire
January 24, 2015
Much has been written in the past few days about Apple's 2015 proxy, and especially how the pay for the four other NEOs eclipsed that of CEO Tim Cook, but it is worth noting how the company treated the hiring of Angela Ahrendts from Burberry. The company paid Ms. Ahrendts a total of $73 million, the bulk of which was equity which included $37 million in RSU's to make up for the equity awards she forfeited at Burberry, $33 million in a sign-on grant, comprised of 40% performance-based RSUs based on TSR achievement and 60% time-based RSUs. However, the item which is particularly notable was the severance provision. Apple does not normally agree to severance provisions in new hire agreements, but recognizing that Ms. Ahrendts was not expected to leave Burberry, the company agreed to a three-year limited severance: "If the Company terminates Ms. Ahrendts’ employment other than for cause or if she resigns for good reason during this period, the Company will pay her as severance, in a single lump sum, the amount of her final base salary for the remainder of the three-year period. Under this arrangement, the severance value declines to zero by May 1, 2017." In an era in which severance continues to be criticized as excess, the Apple provision, and its overall disclosure of the full pay arrangement, does a nice job of explaining the rationale behind each element.