The disappointing performance of the iPhone 7 sales and the near death of the iPad are the reason behind the pay cut of the top executives associated with Apple, including company CEO Tim Cook who faced a reduction in his incentive based salary by almost $1.5 million. For the first time after 2009, Apple missed its revenue and profit goals in 2016 and the weak performance took a toll on its top executives’ pay.
Last year, the sales of the iPhone 6S failed to top its predecessor, hence pausing Apple’s extraordinary run of growth. Drop of the sales by 7.7 per cent was observed in 2016 making it the first fall in 15 years and a sharp reversal from the 27.9 per cent growth rate the year before.
Tim Cook has a base salary of $3 million and the rest of the named executives have a base pay is $1 million. If Apple meets net sales and operating income goals, each executive has the potential to earn up to four times their base salary. Cook ended up earning $8.75 million in total compensation for 2016, down from $10.28 million the year prior. The other executives saw total compensation drop by more than $2 million. Hence, Cook’s cash bonus fell to $5.4 million in 2016, down from $8 million the year before and declining for the first time since he assumed leadership of the company in 2011.
Like other smartphone retailers, Apple too has faced increasing competition and moderate growth as many mature markets have reached 80% or higher smartphone penetration. The iPhone made up 63% of the company’s annual revenue, which sold in excess of 45 million units in the last quarter of 2016, but was down year on year. Yet, the number of buyers seeking their first smartphone has shrunk in Apple’s primary markets of the US and Europe.
Lastly, Apple revealed that it made $215.6 billion in sales for the year, 3.7 percent lower than its target of $223.6 billion. Its operating income, meanwhile, stood at $60 billion, 0.5 percent lower than the $60.3 billion target.