Reference no: EM131635752

Employees Are Getting a Bite of Apple’s Stock

Apple recently announced plans to award restricted shares of stock to hourly as well as salaried workers. Apple had been giving this type of incentive pay to managers and selected employees in product groups, which is common in the computer industry, but the new plan made just about all employees eligible. This was unusual because it covered Apple’s retail workers (who represent about half of its total workforce) and call center employees.

Under Apple’s earlier incentive program, product man- agers could recommend employees for stock grants. Each recommendation then went to the board of directors for approval. This process made it impractical for stock to be given to very many of Apple’s tens of thousands of full-time employees. Employees also had been eligible to buy Apple stock at a discount through an employee stock purchase plan.

Apple did not publicly disclose the conditions for receiving stock or the size of the awards, but reports said the value would start at $1,000 to $2,000. The incentives would increase based on length of service and other criteria. The stock units are restricted, so they vest (become eligible for the employee to collect at the preset fair-market price) over a given period of time.

Outsiders viewing the news interpret it as a sign Apple’s leadership is confident about its future. First, this new incentive pay involves a substantial chunk of stock. If the stock price weren’t expected to rise, the move could leave existing investors with less wealth. Second, the stock grants are valued as compensation—and therefore likely to motivate employees—only when the stock itself is valuable.

Despite the wider access to stock grants, the really big payouts go to the top executives. Most recently, Apple’s highest-paid employee was not CEO Tim Cook, but Angela Ahrendts, head of retail operations. Her $25.8 million in total compensation included a salary of $1 million and $20 million in stock grants. CEO Cook earned $10.3 million the same year. But don’t worry about Tim Cook; he is getting by despite trailing Ahrendts’s pay. He was granted much larger stock awards in 2011, following the death of former CEO Steve Jobs, and again in 2016. The million shares he received in 2011 vest over a 10-year period, giving him a massive reason to stay with Apple.

Questions

1. How can Apple’s HR department promote the success of its program of stock grants?

2. If you worked in Apple’s HR department, what kind(s) of individual incentives would you use? Would these be in addition to the stock incentives or in place of the stock rewards? Explain.