Apple 2007 Annual Report Download - page 104

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Apple's shareholders have been generously rewarded for Apple's success, with a three-year annualized shareholder return of 101% through the
end of fiscal 2007. The Committee believes the compensation of the named executive officers has been appropriate and fair in light of Apple's
performance.
B. EXECUTIVE COMPENSATION OBJECTIVES
Apple's goal for executive compensation is simple: attract and retain an exceptionally talented, entrepreneurial and creative team of executives
who will provide the leadership for Apple's success in dynamic, highly-competitive markets.
C. EXECUTIVE COMPENSATION OVERVIEW
1.
Three Components
The compensation program for the named executive officers consists of the following three components, in order of their
importance:
•
Long
-
term equity awards in the form of RSUs under the shareholder
-
approved Employee Stock Plan
• Annual performance-based cash incentives under the shareholder-approved Performance Bonus Plan (the CEO,
however, does not participate in this plan and is not eligible for performance-based cash incentives)
•
Base salary
The named executive officers are also eligible to participate in Apple's health and welfare programs, Employee Stock Purchase
Plan, 401(k) Plan, patent bonus program and other minor employee recognition programs on the same basis as other employees.
2.
Mix of Equity, Cash Incentives and Salary
Apple relies heavily on long-term equity awards because the Compensation Committee believes they are the most effective
compensation element for attracting entrepreneurial, creative executives and promoting their long-
term commitment to Apple. An
RSU award generally vests only if the named executive officer continues employment until the specified vesting date, typically
two to four years after the date of grant. Equity awards also help to ensure a strong connection between executive compensation
and Apple's financial performance because the value of RSUs depends on Apple's future share price.
Although the Compensation Committee reviews the compensation practices of its peer companies as described in Section D6
below, the Committee does not adhere to strict formulas or survey data to determine the mix of compensation elements. Instead,
as described in Section D, the Committee considers various factors in exercising its discretion to determine compensation,
including the experience, responsibilities and performance of each named executive officer as well as Apple's overall financial
performance. This flexibility is particularly important in designing compensation arrangements to attract new executives in
highly-competitive, rapidly changing markets.
3.
Elements of Compensation Not Included In The Compensation Program
The current compensation program for the named executive officers, including the CEO, does not include the following:
• Employment contracts
100