At the end of the fiscal year, Cook and his team delivered lights-out, extraordinary results anyway, not only blowing past the lackluster bar set by the board, but handily surpassing the prior year’s results, with net sales increasing 6% and operating income increasing 8%.
Cook collected the maximum bonus payout of $12 million—just as he would have, had the company not performed as well, thanks to the safety net offered by Apple’s board.
“They’re not necessarily making decisions today, but they’re just having the conversation about the approaches they might consider at year end, and let’s see how the year plays out,” said Joanna Czyzewski, a co-author of the study and principal at CAP.
“You might have growth in your targets, you might have widened the curve and the wings,” Peek said. “It’s—for lack of better words—easier to get into the money, because at the end of the day, these executives are trying to do the right thing.”
HP did not respond to a request for comment.
Peek, who spoke generally and not about any specific companies, acknowledged the reputational pressure some of these decisions can carry.
“If the company is making these adjustments and giving executives a big payout at the same time as significant layoffs, I’m not sure shareholders would formally comment on that, but the overall optics would be seen in the press,” said Peek.
Other companies handled uncertainty earlier, back at the goal-setting stage before a carveout would be on the table. Unlike HP, Apple didn’t strip out any costs after the fact, the board made goals conservative at the start.
For the past three fiscal years, Apple’s compensation committee has set at least one bonus target at or below the prior year’s actual results. Bonuses pay out at Apple based on hitting threshold, target, and maximum performance. Hitting threshold earns 50% of the target payout for that measure, hitting the target gets them 100%, and clearing the top rung, the maximum, means executives can double their bonus opportunity.
For fiscal 2025, Apple’s people and compensation committee appear to have faced a conundrum. Apple’s fiscal year begins in late September and the committee sets goals prior to the start of the fiscal year. President Trump was campaigning against Vice President Kamala Harris and his agenda included massive new tariffs on imports that would hit Apple’s China-based manufacturing significantly. Trump’s tariff rollout wouldn’t happen for roughly another six or seven months when the committee was setting goals. In hashing them out, the committee considered financial results from prior years “as a reference point” but chose goals for 2025 that would “reflect strong financial results commensurate with the projected business and economic conditions for the current fiscal year,” the report in Apple’s 2026 proxy statement reads.
The fiscal 2024 results were key for determining the goals for fiscal 2025.
For fiscal 2025, the board set the net sales target at $391 billion—the exact same as the prior year’s actual result. The operating income target was set at $118.5 billion, some $4.7 billion lower than the prior year’s actual result. In doing so, the proxy points to “trade policies and impacts and foreign currency” fluctuations as the rationale for the goal-setting but the committee doesn’t specify a certain anticipated hit to profit margins.
The same broad pattern also appeared in fiscal years 2023 and 2024 when Apple set at least one target at or below the prior year’s actual results. During fiscal years 2021 and 2022, the targets were both set above the prior year’s actual results.
Apple did not respond to requests for comment.
In the proxy, the compensation committee explained the reasons behind the approach, and wrote that it made the decisions after considering business scenarios “and once again focusing on the underlying business performance rather than the absolute growth rates.”
Generally, companies don’t lower the bar in goal setting arbitrarily, they align targets with their financial budgets to measure performance against what they reasonably anticipate, Czyzewski noted. In setting comp-related goals, companies take into consideration their strategic growth for the year, including growth expectations, and headwinds and tailwinds in the industry and broader economy when they set budgets, added Peek. Target incentive goals are usually set at budget and should “be achievable but stretch,” she said.
“If the goals are too easy, then executive pay may not align with the shareholder experience,” Peek said. “If the goals are too difficult or aspirational, then the award may be demotivating if it is believed that all or most of the award cannot be achieved.”
That’s why board committees have conversations at the beginning of the year about financial metric definitions and possible adjustments, Czyzewski said.
“The intent when goals are set is to ‘get it right’ and account for what is both in and out of the executive team’s control—and set realistic goals,” she said. “But when the unexpected happens, it is good to have a plan and parameters for evaluating results and ensuring pay aligns with performance.”
That way, the conversations at the end of the year will be less about pure board discretion and more about evaluating outcomes within the performance framework.
“If companies are setting targets with their budget,” Czyzewski said, “you’re still aligning them to what finance actually thinks is achievable.”
In contrast, not every company reached for tools in the kit, although few businesses have the size and risk profile of Apple.
Most companies with a calendar fiscal year approved their 2026 incentive goals in February or the first week of March. Iran erupted days later.
“So even the latest of those probably had those goals approved about two or three days before the news broke about the Iran situation,” said Czyzewski, referring to the fact that calendar year companies did not have an opportunity incorporate the conflict into their goal setting process. “It’s impacting everyone this year, but no one knows how much.”
Whether boards respond the same way they did to tariffs depends heavily on how the conflict unfolds, said Czyzewski. Companies are likely to look for precedent, added Peek— including how boards responded to the Iraq invasion in 2003.
“It would be looking into a crystal ball that we just do not know, because we don’t know how long this conflict is going to last,” she said.
And, of course, tariffs are still on the table too.
“If you did not make a carve-out last year, you’re probably not going to make one this year,” said Peek. “But if you did—and you still feel like tariffs are going to significantly impact you—you might still consider using that lever.”
The Compensation Advisory Partners analysis published on Friday covered 50 public companies with revenues ranging from $1.1 billion to $416 billion.
