Apple Incorporation Strategic Analysis - Research Paper Example

? Research Paper – Apple Incorporation Research Paper – Apple Incorporation The board of directors at Apple Inc: The board of directors at Apple Inc. comprises eight individuals. The board comprises individuals like Arthur D. Levinson Chairman at Genetech Inc. and former Vice President of United States of America Albert Gore Junior. The board of directors mostly comprises individuals who have either held top positions in different companies in the past or are currently a part of their board of directors. Qualifications wise the board is a mix of innovators and researchers. The board comprises two PhD holders and key personalities like Robert A. Iger the current CEO and president of The Walt Disney Company (Apple Inc., 2013b). The combination of innovation and research gives Apple’s Board the leadership qualities that are needed for consumer electronics business. Research provides Apple with access to the latest technology while innovation provides the company’s products with the competitive edge over its rivals. The board can take decisions based on both technology and innovation. 2. Committees the board sits on: The board at Apple Inc. sits on three committees: Audit and Finance, Compensation and Nominating and Corporate Governance. The Audit and Finance committee is responsible for maintaining the financial matters of the company. Moreover the committee looks after the audit system, performs risk management and also looks after the security of the data. Financial matters are of great importance to Apple Inc. and to make sure that the committee functions at optimum efficiency the members of the committee are some of the brilliant minds of the leading companies in the world (Apple Inc., 2011a). The second committee is Compensation committee whose main purpose is to design incentive plans for the company. In addition to designing the Committee can also review and modify any incentive plan as it sees fit. The committee has three members with Andrea Jung being the chairperson for the Committee (Apple Inc., 2013a). The third Committee is Nominating and Corporate Governance Committee whose sole responsibility is to nominate candidates for the Board of Directors at Apple Inc. In addition the committee can advise the Board of Directors regarding matters of governance. The committee comprises three members and William V. Campbell is appointed as the Chairperson of the Committee (Apple Inc., 2011). 3. Management at Apple Inc: Most of the individuals working for Apple have been working with the company since its formation. There are a few who joined shortly after Steve Jobs was made the CEO at Apple Inc. in 1997 (Apple Inc., 2013d). The management team is a relatively experienced one with people who have worked with some of the greatest companies in the world. One such example is Craig Federighi the Senior Vice President at the company. Federighi worked for NeXT Inc. and Ariba before working for Apple in 2009. NeXT Inc. and Ariba were one of the most popular IT companies of their time. Federighi is just one example of the many experienced individuals working for the management of Apple Inc. (Lowensohn, 2011). 4. Board’s Philosophy on Executive Compensation: Executive compensation at Apple Incorporation is determined by the Compensation Committee which comprises 4 non-employee directors of the company. As per the “Definitive Proxy Statement”, the executive compensation program of the company includes awarding Restricted Stock Units (RSU) to all executive members of the company (Apple Inc., 2013d). However, the RSUs were not awarded to one executive member, Timothy Cook, who was promoted to the CEO of the company. In addition, the Compensation committee also has established a sound basis for determining the remuneration and bonuses for executive members of the company. As for instance, the Committee considers a number of factors while evaluating the remuneration and bonuses of the executive members, which include: Competitive Market Data, Internal Equity Considerations, and Assessment of Company’s Financial Performance (Apple Inc., 2013d). These factors are considered while determining or revising the salaries or determining bonuses for executive members of the company. 5. Metrics of CEO’s Inventive Compensation: The CEO of Apple Incorporation, Mr. Timothy Cook, received 1 million Restricted Stock Units in lieu of his becoming the CEO of the company. However, no Restricted Stock Units were granted by the compensation committee to the CEO since they were only applicable to executive members other than CEO. In addition to this, the inventive compensation of the CEO of Apple Incorporation also reflects sound metrics as the base salary of Mr. Cook, which was $ 900,000 before becoming the CEO, was raised by $ 500,000 on the grounds that he was vested with additional responsibilities of overseeing the company in the capacity of CEO (Apple Inc., 2013d). The company’s compensation committee follows 100 percent and 200 percent rates of bonuses for executive members of the company on the basis of company’s performance. The CEO of the company is entitled to bonuses on the same grounds and same percentage of bonuses (Apple Inc., 2013d). 6. Reasonability of Compensation on the Basis of Financial Performance: As noted in the proxy statement of the company, the base salaries for executive members of the company were raised on the basis of various factors, which include review of financial performance of the company. Based on the targets set for financial performance of the company by the board, two rates of bonus to be paid to executive members are set, which are 100% and 200% (Apple Inc., 2013c). Following table shows how compensation of executives is tied up against financial performance of the company: Percentage of Base Salary Payable as Performance-Based Cash Bonus Criteria Target Maximum Performance Based Payout Net Sales 50 percent 100 percent 100 percent Operating Income 50 percent 100 percent 100 percent Total Payout 200 percent Source: (Apple Inc., 2013) In the financial year, the financial performance of Apple exceeded the maximum goals set for the year and accordingly executives were compensated 200 percent of their basic salaries (Apple Inc., 2013c). 7. Related Party Transactions: Apple Inc. has established and disclosed its related party transactions in a separate document. The company has recognized that there are certain transactions which fall into this category. These transactions take place between the company and its subsidiaries or those corporations which have direct or indirect interests of the company’s directors. Interest of individuals is ascertained as more than5% in other companies’ stocks. The company records and report interested transactions which exceed $120,000 during a year. If a related person is just an employee of another business or charitable organization and the amount exceeds $1 million or 2% of the company’s revenues in a year then it must be reported as interested transactions (Apple Inc., 2013e). There are no such transactions reported in the company’s Form 10-K report for the year ending 2012. References Apple Inc. (2013a). Apple Corporate Information. Retrieved June 16, 2013, from http://investor.apple.com/faq.cfm?FaqSetID=6 Apple Inc. (2013, June 13b). Executive profiles. Retrieved from http://www.apple.com/: http://www.apple.com/pr/bios/ Apple Inc. (2013c). Form DEF 14A Definitive Proxy Statement. Cupertino: Apple Incorporation. Apple Inc. (2011, April 11d). Governance. Retrieved from apple.com: http://investor.apple.com/governance.cfm Apple Inc. (2013e). Related Party Transactions Policy. Retrieved June 16, 2013, from Apple Inc.: http://files.shareholder.com/downloads/AAPL/2533243587x0x443016/13d18fa0-54e6-4a7e-b4d2-7fd75f626ee2/related_party_transactions_policy.pdf Lowensohn, J. (2011, March 24). Who is Apple's new Mac guy? Retrieved from http://news.cnet.com/: http://news.cnet.com/8301-13579_3-20046998-37.html Read More