The Advisors' Blog

Thanks to speakers Jeff Joyce of Pay Governance and Sheri Adler and David Kaplan of Troutman Pepper Locke for reminding me of a 2024 development in last week’s webcast “Equity Award Approvals: From Governance to Disclosure” (replay available for on-demand viewing) and sharing a great reminder for 2026 proxy statements. During the program, David raised the 2024 lawsuit against Apple alleging that Apple’s proxy disclosure was misleading because the target value disclosed in the CD&A did not match the compensation expense. The two values didn’t match because Apple determines the number of PSUs to be granted by dividing the target value by the closing stock price on the date of grant, rather than using a Monte Carlo simulation, which is what is required to determine accounting expense and reported in the Summary Compensation Table.

If you’re thinking, “wait, tons of companies do this,” that’s true. (David, Jeff and Sheri discussed why this method is sometimes used instead of a Monte-Carlo model.) And, as Liz shared at the time, the court ultimately dismissed the complaint with prejudice. But, as David noted during the program, Apple had clear disclosure explaining the method used by the compensation committee and the difference in the accounting valuation. Many other companies are not as explicit. So I pulled up Apple’s 2025 proxy, and I completely agree. If this is applicable to your company, the relevant footnote from Apple’s Summary Compensation Table is below. You may want to compare your disclosure and consider improvements. I particularly like that Apple repeats the target values from the CD&A in the footnote.

The target grant value of Mr. Cook’s long-term equity award was $50 million for 2024, $40 million for 2023, and $75 million for 2022. The target grant value of our other named executive officers’ long-term equity awards was $20 million for each of 2024, 2023, and 2022. This column shows the grant date fair value for accounting purposes of the long-term equity awards granted to our named executive officers. The grant date fair value for time-based RSUs is measured in accordance with FASB ASC 718 and based on the closing price of Apple’s common stock on the date of grant. The grant date fair value for performance-based RSUs is calculated using a Monte-Carlo model for each award on the date of grant, as determined under FASB ASC 718, based on the probable outcome of the performance condition as of the grant date. The grant date fair value for each award may differ based on the applicable data, assumptions, and estimates used in the model. See footnote 1 to the table entitled “Grants of Plan-Based Awards 2024.”

While you’re at it, you might as well check your disclosure about equity award valuations & assumptions against Instruction 1 to Item 402(c)(2)(v) and (vi) of the Summary Compensation Tables rules.

– Meredith Ervine