A proxy statement is the document a company sends shareholders before the annual meeting. It is filed as a DEF 14A. The DEF stands for definitive, which means this is the final version rather than a preliminary one.
A proxy statement is the document a company sends shareholders before the annual meeting. It is filed as a DEF 14A. The DEF stands for definitive, which means this is the final version rather than a preliminary one.
It exists because shareholders vote and the company has to tell them what they're voting on. Directors. The auditor. Shareholder proposals. And an advisory vote on executive pay, which people call say on pay.
For anyone reading filings, the proxy matters for one reason above all. It is where executive pay lives. The 10-K does not contain it. If you want to know what the chief executive was paid you go here.
Apple's proxy for its 2024 annual meeting, filed January 11 2024, covering fiscal 2023.
The first figure comes from the summary compensation table, which shows salary, bonus, stock awards, option awards and other compensation for the named executives, for three years side by side.
The second and third come from the pay ratio disclosure, which US public companies are required to publish. The company identifies a median employee, works out that person's annual total compensation on the same basis as the chief executive's, and states the ratio.
Check the arithmetic yourself. $63,209,845 divided by $94,118 is 671.6, which the company reports as 672 to 1. The figures agree, which is the point of checking.
The trap is reading the total as cash.
Most of a large chief executive's pay is stock. The summary compensation table reports stock awards at their grant date fair value, which is an accounting estimate made on the day the award was granted. It is not what was banked that year and it is not what the shares will eventually be worth. If the share price falls the number in the table does not change.
The second trap is comparing pay ratios across companies as if they measured the same thing. The ratio depends almost entirely on who a company employs. A business whose median employee is a part-time retail worker will report a vast ratio. A business that employs only engineers will report a small one, with the same chief executive pay. The ratio compares one company's top to one company's middle. Across companies it mostly measures workforce mix.
A journalist asks you to check a claim about Apple's chief executive pay for fiscal 2023.
Which document do you open?
The definitive proxy statement on Form DEF 14A for the 2024 annual meeting. Filed January 11 2024.
What does the summary compensation table give?
Total compensation of $63,209,845 for fiscal 2023.
The journalist calls it a $63 million salary. Correct her.
Salary is one line of the table. Most of the total is stock awards carried at their grant date fair value. It is compensation and it is not cash pay.
She asks how it compares with a typical employee there.
The company discloses median employee compensation of $94,118 and a ratio of 672 to 1. That comparison holds inside Apple and does not transfer to a company that employs different kinds of people.
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