carnegie

mpantone said:

chadbag said:

Does anyone know if this is actual vested stock or new grants that have yet to vest?  (And what the vesting schedule is)

As mentioned by Carnegie, Cook receives both time-based and performance-based grants.

My guess -- based on Tim's public persona of fairness and equality -- is that his time-based grants are on the same vesting schedule as those of his line employees. In Silicon Valley, this has long meant 20% of the grant's shares vesting one year after the date of the grant followed by 2% additional vesting each month. Thus, to be 50% vested, it would take 1 year + 15 months. To be fully vested for that specific grant, it would take 1 year + 40 months = 4 years + 4 months.

Tim's sense of fairness shows up a bit in his $3 million salary. He is not playing that $1 annual salary game. He is still contributing to the regular social welfare pots: Social Security, Medicare, SDI, etc. plus other things like a pre-tax medical account ("cafeteria plan") and a long-term care policy. The rest of it is likely withheld for federal and state income taxes. I bet his actual bi-weekly pay stub is less than $50 net.

Silicon Valley has a nickname for these time-based grants; they are known as "golden handcuffs" because they incentivize the employees to remain with the company.

His performance based grants are probably described in the company's SEC filings. Note that these types of performance-based grants for senior executives don't automatically vest. They are reviewed and approved by the Board of Directors' compensation committee. Often, performance based grants are not fully granted if the company's performance falls short of the goals set in the grant. In this case, it is usually not an all-of-nothing deal and the compensation committee reduces the amount of awarded grant.

The Bloomberg figure would have to be that of exercised grants. An unexercised grant -- even if fully vested -- is still theoretical money. Cook -- like others in his category -- periodically exercise vested grants for the primary purpose of portfolio diversification. 

Of course, the IRS does not care about unvested, unexercised grants. The only figure that is truly important is the value of the exercised grant. That is the number that the IRS (and Franchise Tax Board for Tim) look at.

My guess is that Tim also donates some of his fully appreciated stock to charitable organizations. There is a considerable tax benefit to donating equities.

chadbag said:

Does anyone know if this is actual vested stock or new grants that have yet to vest?  (And what the vesting schedule is)

crowley said:

Presumably the shift is a fair bit to do with the value of Apple shares rising and other shares falling (or at least not rising as much).  BH hasn't necessarily increased its holding that much by buying more shares, value has just shifted.

randominternetperson said:

I'm not an expert on Berkshire Hathaway, but my sense was that it was generally a conglomerate of wholly owned subsidiaries rather than just a mutual fund that owned minority shares in various companies.  Now that a single minority investment is approaching half of the value of the company does this represent a fundamental shift in BH?