Apple disclosed that new CEO John Ternus has a target equity award of $55 million for fiscal year 2027, with the majority tied to Apple’s shareholder return performance relative to S&P 500 components. This arrangement reflects the board’s decision to directly link the new CEO’s primary performance evaluation to relative stock price performance.
75% of the reward is tied to relative returns.
The documents show that 75% of this equity award consists of performance-based restricted stock, valued at approximately $41.25 million based on target levels. The vesting of these shares will depend on Apple’s total shareholder return relative to other companies in the S&P 500.
The remaining 25%, approximately $13.75 million, will be vested over four years on a time-based schedule. In addition to the equity grant, Ternus will receive an annual salary of $3 million and a pro-rated restricted stock award of $2.5 million for serving as CEO in fiscal year 2026.
The evaluation benchmark covers the entire S&P 500.
Apple’s current executive compensation framework does not compare solely with peer companies but directly benchmarks against the entire S&P 500. Under this mechanism, Apple typically needs to achieve a relative performance level at approximately the 55th percentile of S&P 500 constituents to earn the target amount of performance-based restricted stock units.
The final payout range for similar incentives typically fluctuates between 0% and 200% of the target value, depending on relative shareholder return performance. The report notes that the final payment conditions for Ternus’s fiscal year 2027 incentive will be determined by the specific terms of the award.
It becomes harder to outperform with a higher market capitalization.
Ternus took over a company far larger than any he had previously managed. During Tim Cook’s tenure, Apple’s market capitalization rose from approximately $350 billion to about $4.75 trillion, with an annualized stock return of approximately 23.5%, excluding dividends.
As of last Friday's close, Apple's stock price stood at $319.97, corresponding to a market capitalization of approximately $4.67 trillion. For a company of such massive market value, continuing to outperform the broader market is significantly more challenging, making Ternus's performance targets a focal point for the market.
Additional context: Ternus’s first major product milestone following his appointment is Apple’s new product launch on September 9. The market is also closely watching whether Apple can accelerate its AI strategy, which is one of the key focal points in current discussions around Apple’s valuation.