Apple 2007 Annual Report Download - page 103

and 2,600 shares of the Company's common stock in April 2006, June 2006 and July 2007, respectively, and (ii) one Form 4 was filed for Tony
Fadell on November 15, 2007 with respect to the acquisition by Mr. Fadell's spouse of 40,000 restricted stock units in December 2006 and
25,000 restricted stock units in October 2007.
Item 11. Executive Compensation
COMPENSATION DISCUSSION AND ANALYSIS
A. EXECUTIVE SUMMARY
This section explains Apple's executive compensation program as it relates to the following "named executive officers:"
Apple's executive compensation program for the named executive officers consists of long-term equity awards in the form of restricted stock
units ("RSUs") and cash compensation in the form of performance-based cash incentives and base salaries. Each year, the Compensation
Committee, which is made up entirely of independent directors, determines the compensation for the named executive officers.
Apple relies heavily on long-term equity awards to attract and retain an outstanding executive team and to ensure a strong connection between
executive compensation and financial performance. An RSU award gives the named executive officer the right to receive, at no cost, a specified
number of shares of Apple common stock when the award vests, typically at intervals of two to four years. Because the value of the RSUs
depends on Apple's future share price, the award links compensation to future financial performance. The officer is generally not eligible to
receive the shares if employment is terminated before the RSUs vest. The Compensation Committee reviews annually the outstanding, unvested
equity awards of each named executive officer to determine, in the Committee's discretion, whether additional awards are warranted in light of
the officer's performance, the competitive environment and the other factors discussed in Section D3 below.
The performance-based cash incentives compensate the named executive officers for achieving specific financial goals established annually by
the Compensation Committee, as described in Section D4. The Committee sets aggressive performance goals each year based on the revenue and
operating income objectives in Apple's internal business plan. Payments are not automatic, however, because the Committee may exercise its
discretion to reduce (but not increase) the amount of any incentive payment based on an officer's overall performance.
Based on the factors discussed in Section D3 below and the Committee's belief that the outstanding, unvested equity awards still had significant
retention value, the Committee made no new equity awards to the named executive officers in fiscal 2007. The officers earned cash incentives in
fiscal 2007 at the maximum amount allowed by the plan—100% of base salary—because Apple's financial performance significantly exceeded
the annual performance goals set by the Committee. The Committee assessed both the amount and allocation of the compensation components
for each officer based on Apple's overall annual financial performance and each officer's individual performance. The Committee did not
increase base salaries for the named executive officers because it concluded that the total compensation for each officer was appropriate.
99
Steve Jobs
Chief Executive Officer
Tim Cook
Chief Operating Officer
Peter Oppenheimer
Senior Vice President and Chief Financial Officer
Ron Johnson
Senior Vice President, Retail Sales
Tony Fadell
Senior Vice President, iPod Division