When Apple CEO Tim Prepare dinner and his government group acquired their efficiency targets for fiscal 2025, the board set a modest bar for bonus payouts. The brand new targets, together with gross sales and working revenue, didn’t require Apple’s management to broaden the enterprise—the board set targets on the identical degree or under the prior yr’s outcomes, citing “trade policy” and an “uncertain macroeconomic outlook.”
On the finish of the fiscal yr, Prepare dinner and his group delivered lights-out, extraordinary outcomes anyway, not solely blowing previous the lackluster bar set by the board, however handily surpassing the prior yr’s outcomes, with web gross sales growing 6% and working revenue growing 8%.
Prepare dinner collected the utmost bonus payout of $12 million—simply as he would have, had the corporate not carried out as effectively, because of the protection web provided by Apple’s board.
Apple’s board is hardly distinctive. An unique evaluation of pay information from 50 public corporations by Compensation Advisory Companions (CAP), revealed Friday, reveals how company boards throughout America use a variety of strategies—more-conservative targets, widened efficiency curves, and flattened payout ranges—to guard CEO compensation from uncertainties just like the chaos of President Trump’s Liberation Day tariffs in 2025. In accordance with CAP’s findings, whole pay for CEOs in 2025 rose 8% year-over-year, with annual bonus payouts up 4%. In the meantime, median monetary efficiency was typically flat to up, with median income rising 2.9% and earnings per share down barely at damaging 1.6%, the evaluation discovered. Even amongst corporations with the weakest payouts on account of underperformance, CEOs nonetheless collected 87% of their goal bonuses, up from 77% the yr earlier than. The share of corporations that landed within the lowest bonus payout tier was down, from 15% in 2024 to 9% in 2025.
Now, with the Iran battle erupting weeks after most corporations finalized their 2026 incentive targets—and world inventory markets down roughly $3.5 trillion—some market observers count on that boards will quickly be holding the identical conversations once more.
“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,” stated Joanna Czyzewski, a co-author of the examine and principal at CAP.
To make certain, a number of the change among the many weakest-performing corporations within the CAP report is due to bettering outcomes. “Some of it is definitely business improvement,” famous Lauren Peek, a companion at CAP and co-author of the examine. However, she stated, there are a whole lot of methods corporations can soften the blow of uncertainty and curveballs like tariffs.
“You might have growth in your targets, you might have widened the curve and the wings,” Peek stated. “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.”
The Escape Hatch
Among the many early-filer corporations within the CAP examine, their fiscal years finish between August and October 2025. Which means Trump hadn’t even received the election after they had been budgeting and planning for the 2025 fiscal yr. Firm proxy statements, which embrace compensation particulars, present examples as to how some corporations handled impending tariffs which later got here to fruition on April 2, 2025, earlier than the Supreme Court docket struck them down final month. (Trump has since imposed a world 15% tariff.)
At private laptop and printing big HP, the corporate didn’t look forward to tariffs to hit earlier than crafting a plan. In January 2025, on the identical time the board locked in HP’s fiscal 2025 efficiency targets, the HR and compensation committee accepted an express tariff carveout. Then, when it got here time to calculate bonuses for CEO Enrique Lores and his government group at year-end, the committee stripped out the “net impact of tariff-related costs” from each annual and long-term incentive calculations, the corporate disclosed in its proxy assertion. HP stated the changes “reflect the net impact of the tariffs after management’s actions, including significant and swift movement of the company’s manufacturing and supply chain along with additional cost reductions and price increases.” That included shifting greater than 30% of HP’s manufacturing from China to Southeast Asia and Mexico.
In the end Lores and the chief group earned 67.3% of their goal bonus on common. HP described the tariff hit as having “unexpected magnitude” on its monetary outcomes and annual and long-term incentive plan calculations after the related targets had been set, suggesting that the bonus payouts would have been decrease had the tariff affect not been excluded. The compensation committee additionally used discretion to deliver down the chief payouts in keeping with the broader worker pool, a small acknowledgment of the optics of protecting C-suite executives whereas the broader workforce takes it on the chin. Lores collected $1.9 million after which stepped down from HP in February and joined PayPal as its new CEO this month.
HP didn’t reply to a request for remark.
Peek, who spoke typically and never about any particular corporations, acknowledged the reputational stress a few of these choices 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,” stated Peek.
Hedging the Objectives
Different corporations dealt with uncertainty earlier, again on the goal-setting stage earlier than a carveout could be on the desk. Not like HP, Apple didn’t strip out any prices after the very fact, the board made targets conservative firstly.
For the previous three fiscal years, Apple’s compensation committee has set at the very least one bonus goal at or under the prior yr’s precise outcomes. Bonuses pay out at Apple primarily based on hitting threshold, goal, and most efficiency. Hitting threshold earns 50% of the goal payout for that measure, hitting the goal will get them 100%, and clearing the highest rung, the utmost, means executives can double their bonus alternative.
For fiscal 2025, Apple’s folks and compensation committee seem to have confronted a conundrum. Apple’s fiscal yr begins in late September and the committee units targets previous to the beginning of the fiscal yr. President Trump was campaigning towards Vice President Kamala Harris and his agenda included huge new tariffs on imports that might hit Apple’s China-based manufacturing considerably. Trump’s tariff rollout wouldn’t occur for roughly one other six or seven months when the committee was setting targets. In hashing them out, the committee thought-about monetary outcomes from prior years “as a reference point” however selected targets for 2025 that might “reflect strong financial results commensurate with the projected business and economic conditions for the current fiscal year,” the report in Apple’s 2026 proxy assertion reads.
The fiscal 2024 outcomes had been key for figuring out the targets for fiscal 2025.
In fiscal 2024—which noticed Apple launch its iPhone 16 and $3,499 Imaginative and prescient Professional digital actuality headset—Apple delivered file web gross sales of $391 billion and working revenue outcomes of $123.2 billion. The outcomes had been 2% and eight% year-over-year will increase, respectively.
For fiscal 2025, the board set the online gross sales goal at $391 billion—the very same because the prior yr’s precise outcome. The working revenue goal was set at $118.5 billion, some $4.7 billion decrease than the prior yr’s precise outcome. In doing so, the proxy factors to “trade policies and impacts and foreign currency” fluctuations because the rationale for the goal-setting however the committee doesn’t specify a sure anticipated hit to revenue margins.
In the end, Prepare dinner and Apple delivered extraordinary outcomes so robust the structural security web constructed for the yr might have been moot. Internet gross sales in fiscal 2025 swelled to $416.2 billion and working revenue was $133.1 billion—bashing previous the utmost efficiency thresholds by greater than $14 billion in web gross sales and $9 billion in working revenue. Prepare dinner and the opposite named government officers took residence most payouts on their annual bonuses, which for Prepare dinner equated to $12 million, in response to Apple’s disclosures.
The identical broad sample additionally appeared in fiscal years 2023 and 2024 when Apple set at the very least one goal at or under the prior yr’s precise outcomes. Throughout fiscal years 2021 and 2022, the targets had been each set above the prior yr’s precise outcomes.
Apple didn’t reply to requests for remark.
Within the proxy, the compensation committee defined the explanations behind the strategy, and wrote that it made the choices after contemplating enterprise situations “and once again focusing on the underlying business performance rather than the absolute growth rates.”
Typically, corporations don’t decrease the bar in purpose setting arbitrarily, they align targets with their monetary budgets to measure efficiency towards what they fairly anticipate, Czyzewski famous. In setting comp-related targets, corporations think about their strategic progress for the yr, together with progress expectations, and headwinds and tailwinds within the trade and broader financial system after they set budgets, added Peek. Goal incentive targets are normally set at funds and will “be achievable but stretch,” she stated.
“If the goals are too easy, then executive pay may not align with the shareholder experience,” Peek stated. “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 first of the yr about monetary metric definitions and potential changes, Czyzewski stated.
“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 stated. “But when the unexpected happens, it is good to have a plan and parameters for evaluating results and ensuring pay aligns with performance.”
That manner, the conversations on the finish of the yr will probably be much less about pure board discretion and extra about evaluating outcomes throughout the efficiency framework.
“If companies are setting targets with their budget,” Czyzewski stated, “you’re still aligning them to what finance actually thinks is achievable.”
Taking the Hit
In distinction, not each firm reached for instruments within the equipment, though few companies have the dimensions and threat profile of Apple.
TransDigm, which produces pumps, valves, and different elements for plane, explicitly instructed traders that it had the authority to ratchet up payouts by 20%, however didn’t do it in fiscal 2025. The corporate beat its goal targets however didn’t clear the utmost. CEO Kevin Stein collected $2.6 million.
Equally, carbon black producer Cabot instructed traders it “retains the discretion” to regulate funds, however declined to do it in fiscal 2025. CEO Sean Keohane collected $1.4 million after hitting 90% of goal towards efficiency and 130% of goal for his particular person efficiency, leading to a 102% payout.
Executives at garden and grounds tools producer Toro landed between threshold and goal for its targets, leading to a payout of 81.6% for CEO, which translated to $1.3 million for chairman and CEO Richard Olson.
The Iran Alternative
Most corporations with a calendar fiscal yr accepted their 2026 incentive targets in February or the primary week of March. Iran erupted days later.
Whether or not boards reply the identical manner they did to tariffs relies upon closely on how the battle unfolds, stated Czyzewski. Firms are more likely to search for precedent, added Peek— together with 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 stated.
And, after all, tariffs are nonetheless on the desk too.
“If you did not make a carve-out last year, you’re probably not going to make one this year,” stated 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 Companions evaluation revealed on Friday lined 50 public corporations with revenues starting from $1.1 billion to $416 billion.
