2021 Business Highlights

In 2021, we remained focused on creating the best technology for our customers—delivering our most powerful lineup of hardware, exciting new software features, and the most diverse range of services for our customers to choose from.

For a detailed discussion of our financial results for 2021, see our Annual Report on Form 10-K for the year ended September 25, 2021.

Apple’s Board of Directors

Board Diversity

Effective Board Oversight of Risk Management

To serve the long-term interests of our shareholders, our Board oversees management’s identification, assessment, and mitigation of risks related to our company, business, and people.

Selected Areas of Board and Committee Oversight in 2021

For more detailed information on Apple’s corporate governance and risk oversight framework, see the section entitled “Corporate Governance” beginning on page 9.

Corporate

Governance

This section describes the role and structure of Apple’s Board and our corporate governance framework.

Role of the Board of Directors

Apple’s Board oversees the CEO and other senior management in the competent and ethical operation of Apple on a day-to-day basis and assures that the long-term interests of shareholders are being served. To satisfy the Board’s duties, directors are expected to take a proactive, focused approach to their positions to ensure that Apple is committed to business success through the maintenance of high standards of responsibility and ethics.

Board Meetings and Attendance

The Board met five times during 2021 with each member of the Board serving at the time attending all of the meetings.

Apple expects all of its directors to attend the Annual Meeting. All directors serving at the time attended the 2021 annual meeting of shareholders.

Board Independence and Qualifications

The Board has determined that all Board members, other than Mr. Cook, are independent under applicable rules of The Nasdaq Stock Market LLC (“Nasdaq”).

Apple’s Board has a standing Audit and Finance Committee (the “Audit Committee”), Compensation Committee, and Nominating and Corporate Governance Committee (the “Nominating Committee”). The Board has determined that all committee members are independent under applicable Nasdaq and Securities and Exchange Commission (“SEC”) rules for committee memberships, and that each member of the Audit Committee also meets the additional independence criteria set forth in Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

The Board has also determined that each Audit Committee member qualifies as an “audit committee financial expert” as that term is defined under SEC rules.

Board and Committee Structure

Apple regularly reviews the Board’s leadership structure and the responsibilities and composition of its standing committees. The structure and composition of Apple’s Board and its committees are intended to leverage the diverse perspectives of the Board members and promote effective oversight.

The Board believes that its current leadership structure, in which the roles of Chair and CEO are separated, best serves the Board’s ability to carry out its roles and responsibilities on behalf of Apple’s shareholders, including its oversight of management, and Apple’s overall corporate governance. The Board also believes that the current structure allows our CEO to focus on managing Apple, while leveraging our independent Chair’s experience to drive accountability at the Board level.

The current membership and function of each standing committee is described below. Each committee operates under a written charter adopted by the Board, which is available at investor.apple.com/leadership-and-governance. Each committee reviews and assesses its charter annually.

Annual Board and Committee

Self-Evaluations

The Board conducts an annual self-evaluation to assess whether the Board, its committees, and each member of the Board are working effectively together, and to provide an opportunity to reflect upon, and improve, processes and effectiveness.

The Nominating Committee designs and establishes the overall evaluation framework, and Dr. Levinson, the independent Chair of the Board, leads the evaluation interviews and feedback. Dr. Levinson conducts one-on-one discussions with each director to obtain their assessment of the effectiveness and performance of the Board and its committees. Additional discussion topics include Board and committee composition and refreshment; timing, agenda, and content of Board and committee meetings; Board dynamics and function; peer reviews of other members; and executive succession planning. Board members are also invited to discuss the performance of Dr. Levinson directly with the Chair of the Nominating Committee. A summary of the results is presented to the Board on an anonymous basis, identifying any themes or issues that have emerged.

Each committee conducts its own annual self-evaluation and reports the results to the Board. Each committee’s evaluation also includes an assessment of the committee’s compliance with Apple’s Corporate Governance Guidelines and the committee’s charter.

Board Oversight

The Board takes an active role in overseeing corporate and product strategy and seeks to ensure that the long-term interests of Apple and its shareholders are being served.

Board Oversight of Apple’s Values and Our People

Throughout the year, the Board and its committees review and discuss with management progress relating to Apple’s values: accessibility, education, environment, inclusion and diversity, privacy, and supplier responsibility. The Board and its committees also review and discuss with management matters related to our people, including Apple’s commitments and progress towards inclusive and diverse representation among our employees, employee engagement, compensation and benefits, business conduct and compliance, and executive succession planning.

In 2020, the Board adopted Apple’s human rights policy—Our Commitment to Human Rights—on behalf of Apple. The policy governs how we treat everyone, including our customers, employees, business partners, and people at every level of our supply chain. Apple identifies salient human rights risks through internal risk assessments and external industry-level third-party audits. Additionally, the policy stipulates that Apple maintains active communication channels with rightsholders and other stakeholders. The Board is responsible for overseeing and periodically reviewing our Human Rights Policy. Apple’s General Counsel is responsible for its implementation, and reports to the Board and its committees on our progress and significant issues identified during the diligence process.

At the onset of the COVID-19 global pandemic, Apple management activated company-wide structures to assess, respond to, and mitigate adverse impacts, including enhanced health and safety measures for our people and the people in our supply chain. During 2021, the Board and its committees continued to review and discuss with management the assessment and mitigation of the impact of COVID-19 on Apple’s employees, supply chain, and business.

Board Oversight of Risk Management

The Board believes that evaluating the executive team’s management of the risks confronting Apple is one of its most important areas of oversight. In carrying out this responsibility, the Board is assisted by each of its committees that considers risks within its areas of responsibility and apprises the full Board of significant matters and management’s response.

Selected Areas of Board Oversight

Environment. The Board reviews and discusses updates on environmental matters with Apple’s Vice President of Environment, Social, and Policy Initiatives, who is responsible for the development, review, and execution of plans designed to minimize Apple’s impact on the environment. These reports include Apple’s progress towards environmental and climate goals and the environmental impact of our products and operations.

Legal and Regulatory. Together with the Audit Committee, Apple’s Board takes an active role in overseeing legal and regulatory risks related to Apple’s business. The Board receives regular updates from Apple’s General Counsel and Apple’s Chief Compliance Officer on legal and regulatory developments affecting the company, including updates on legislative developments, government investigations, litigation, and other legal proceedings.

Supply Chain. The Board reviews and discusses with management reports regarding Apple’s supply chain and operations. These reports include updates from Apple’s Senior Vice President, Operations, on supply constraints, supply chain diversification, and our program to oversee Apple’s Supplier Code of Conduct and Supplier Responsibility Standards. Apple reports publicly on its efforts and progress in the critical work of protecting people and the planet across its supply chain through an annual People and Environment in Our Supply Chain report.

Selected Areas of Nominating Committee Oversight

Board Succession Planning. Apple’s Nominating Committee is responsible for assessing the Board’s composition to ensure Apple has the mix of skills, experiences, and diversity necessary to promote Board effectiveness. The Nominating Committee oversees board succession planning, recruitment of potential candidates, and the Board’s self-evaluation process.

Selected Areas of Compensation Committee Oversight

Executive Compensation. Apple’s Compensation Committee ovesees risks related to Apple’s compensation programs. Each year, the Compensation Committee evaluates whether the design and operation of Apple’s compensation programs or policies encourage our executive officers or our employees to take unnecessary or excessive risks. In establishing and reviewing Apple’s compensation programs for risk, the Compensation Committee considers program features that mitigate against potential risks for our executive officers, such as fixed base salaries; goals that are tied to specific company financial measures and payout caps for the annual cash incentive program; clawbacks for our cash and equity incentives; the quantity and mix of long-term performance-based and time-based equity incentives; and stock ownership requirements. The Compensation Committee also generally considers the program features that mitigate potential risks for our non-executive officer employees. In its annual review, the Compensation Committee concluded that Apple’s executive compensation programs and policies continue to provide an effective and appropriate mix of incentives to help ensure performance is focused on long-term shareholder value creation, and do not encourage short-term risk taking at the expense of long-term results or create risks that are reasonably likely to have a material adverse effect on Apple.

Selected Areas of Audit Committee Oversight

Antitrust Compliance. The Audit Committee oversees Apple’s antitrust compliance program. Apple’s Antitrust Compliance Officer is responsible for the development, review, and execution of Apple’s Antitrust Compliance Program and, together with Apple’s General Counsel and Apple’s Chief Compliance Officer, regularly reports to the Audit Committee. These reports include the alignment of the program with Apple’s potential antitrust risks, and the effectiveness of the program’s design in detecting and preventing antitrust issues and promoting compliance with laws and Apple’s policies.

Business Conduct and Global Compliance. The Audit Committee regularly reviews and discusses with management Apple’s business conduct and compliance risks. Apple’s Chief Compliance Officer is responsible for the development, review, and execution of Apple’s Business Conduct and Global Compliance program and regularly reports to the Audit Committee. These reports include the program’s support and validation of Apple’s principles of conducting business ethically, honestly, and in compliance with applicable laws; the effectiveness of the program’s design in detecting and preventing business conduct violations, and promoting ethical business conduct and compliance with applicable laws and Apple policies; as well as results of program evaluations.

Privacy and Data Security. The Audit Committee oversees Apple’s management of privacy and data security risks. The Audit Committee reviews reports on privacy and data security matters from Apple’s General Counsel, and from the heads of Information Security, Business Conduct and Compliance, Business Assurance, and Internal Audit. These reports include updates on Apple’s privacy program, cybersecurity risks, risk management, and relevant legislative, regulatory, and technical developments. Apple also has a management Privacy Steering Committee chaired by Apple’s General Counsel, with members including Apple’s Senior Vice President of Machine Learning and AI Strategy, Senior Vice President of Software, and a cross functional group of senior representatives from Services, Software Engineering, Product Marketing, Corporate Communications, Information Services & Technology, Information Security, Privacy Legal, and the Head of Business Assurance. The Privacy Steering Committee sets privacy standards for teams across Apple and acts as an escalation point for addressing privacy compliance issues for decision or further escalation.

Tax. The Audit Committee reviews reports on tax matters from Apple’s Chief Financial Officer, General Counsel, the heads of global Tax, Business Assurance, and Internal Audit, and from Apple’s independent auditor. These reports include updates on significant domestic and international tax-related developments, worldwide tax audits, international tax structure, international tax policy, and other tax-related legislative matters.

Transparency and Engagement

Reporting

Apple publicly discloses information about our business across a number of topics. This includes our reports on Environmental Progress, People and Environment in Our Supply Chain, and Privacy Transparency, which detail our commitments, programs, and progress on these matters.

In 2021, in response to stakeholder feedback, Apple extended its commitment to transparency with enhanced reporting including Apple’s first Environment, Social and Governance Report (“ESG Report”), which seeks to provide a broad view of our environmental, social, and governance efforts across the company.

We’ve also created a comprehensive index that maps our environmental, social, and governance disclosures (“ESG Index”) across metrics outlined in the Global Reporting Initiative (“GRI”), Sustainability Accounting Standards Board (“SASB”) and the Task Force on Climate-Related Financial Disclosures (“TCFD”) voluntary disclosure frameworks. The ESG Report and ESG Index are available at investor.apple.com/esg.

Shareholder Engagement

We proactively engage with shareholders and other stakeholders throughout the year to learn their perspectives on significant issues, including company performance and strategy, corporate governance, executive compensation, and environmental, social, and governance topics. This engagement helps us better understand shareholder priorities and perspectives, gives us an opportunity to elaborate upon our initiatives with relevant experts, and fosters constructive dialogue. We take feedback and insights from our engagement with shareholders and other stakeholders into consideration as we review and evolve our practices and disclosures, and further share them with our Board as appropriate. Since the date of the 2021 annual meeting of shareholders to the date of this Proxy Statement, management engaged shareholders representing more than a majority of shares held by institutional shareholders, based on the number of institutional shares reported as of September 30, 2021, the latest date that information is available prior to the filing of this Proxy Statement.

Communications with the Board

Any matter intended for the Board, or for any individual member of the Board, should be directed to Apple’s Secretary at One Apple Park Way, MS: 927-4GC, Cupertino, CA 95014 USA, with a request to forward the communication to the intended recipient. In general, any shareholder communication delivered to Apple for forwarding to Board members will be forwarded in accordance with the shareholder’s instructions. Apple reserves the right not to forward to Board members any abusive, threatening, or otherwise inappropriate materials.

Policy on Related Party Transactions

The Board has adopted a written policy for approval of transactions between Apple and its directors, director nominees, executive officers, greater than 5% beneficial owners of Apple’s common stock or any other class of Apple’s equity securities, and each of their respective immediate family members, where the amount involved in the transaction exceeds or is reasonably expected to exceed $120,000 in a single fiscal year and the related party has or will have a direct or indirect interest in the transaction (other than solely as a result of being a director or less than 10% beneficial owner of another entity). A copy of this policy is available at investor.apple.com/leadership-and-governance. The policy provides that the Audit Committee reviews transactions subject to the policy and determines whether or not to approve or ratify those transactions. Certain types of transactions are deemed pre-approved pursuant to standing pre-approval guidelines established by the Audit Committee. In addition, the Audit Committee has delegated authority to its Chair to pre-approve or ratify transactions under certain circumstances. A summary of new transactions covered by standing pre-approvals or transactions approved or ratified by the Chair of the Audit Committee, if any, is provided to the Audit Committee for its review.

In reviewing transactions subject to the policy, the Audit Committee or the Chair of the Audit Committee, as applicable, considers among other factors it deems appropriate:

Transactions with Related Parties

Several of Apple’s Board members and executive officers serve as directors or executive officers of other organizations, including organizations with which Apple has commercial and charitable relationships. Apple does not believe that any director had a direct or indirect material interest in any such relationships during 2021 and through the date of this Proxy Statement.

Governance Documents

Apple’s key governance documents, including our Corporate Governance Guidelines, are available at investor.apple.com/leadership-and-governance.

Business Conduct Policy

Apple seeks to conduct business ethically, honestly, and in compliance with laws. Apple’s code of ethics, titled “Business Conduct: The way we do business,” set outs the principles that guide Apple’s business practices – honesty, respect, confidentiality, and compliance. The code applies to all employees, including Apple’s principal executive officer, principal financial officer, and principal accounting officer. Relevant sections of the code also apply to the Board. Apple expects its suppliers, contractors, consultants, and other business partners to follow the principles set forth in the code when providing goods and services to Apple or acting on its behalf. The code is available at apple.com/compliance/pdfs/Business-Conduct-Policy.pdf. Apple intends to disclose any changes or waivers from this code by posting such information to our website if such disclosure is required by SEC or Nasdaq rules.

Apple’s code is managed by the Business Conduct organization, under the oversight of Apple’s Chief Compliance Officer. Employees are required to complete training on the code upon joining Apple and annually thereafter. With input from relevant stakeholders and executive leadership, we regularly review and update Apple’s code and related policies to ensure they provide clear, actionable guidance to our employees, executive officers, and directors.

Directors

This section describes the experience and qualifications of our Board members and how they are compensated.

Board Composition and Refreshment

Apple’s Board consists of a diverse group of highly qualified leaders in their respective fields. All of our directors have senior leadership experience at large domestic and multinational companies. In these positions, they have gained significant and diverse management experience, including strategic and financial planning, public company financial reporting, compliance, risk management, and leadership development. They also have in-depth public company experience serving as executive officers, or on boards of directors and board committees, and have a robust understanding of corporate governance practices and trends. In addition, many of our directors have experience as directors or trustees of significant academic, research, nonprofit, and philanthropic institutions, and bring unique perspectives to the Board.

The Board and the Nominating Committee believe the skills, qualities, attributes, and experiences of our directors provide Apple with business acumen and a diverse range of perspectives to effectively address Apple’s evolving needs and represent the best interests of Apple’s shareholders.

The Nominating Committee considers candidates for director who are recommended by its members, by other Board members, by shareholders, and by management, as well as those identified by third-party search firms retained to assist in identifying and evaluating possible candidates. In evaluating potential nominees to the Board, the Nominating Committee considers, among other things: independence; character; ability to exercise sound judgment; diversity; age; demonstrated leadership; and relevant skills and experience, including financial literacy, antitrust compliance, and other experience in the context of the needs of the Board. The Nominating Committee is committed to actively seeking out highly-qualified women and individuals from underrepresented communities to include in the pool from which Board nominees are chosen. Additionally, the Nominating Committee has instructed its third-party search firms to ensure that diverse candidates are included in slates of potential nominees.

The Nominating Committee, with the assistance of an outside search firm, and input from our independent directors, Chair of the Board, and CEO, identified Alex Gorsky as a potential candidate for election to the Board. The Nominating Committee has evaluated and recommended to the full Board each of the nominees named in this Proxy Statement for election to the Board.

The Nominating Committee evaluates candidates recommended by shareholders using the same criteria as for other candidates recommended by its members, other members of the Board, or other persons. Shareholders who wish to recommend a director candidate should submit the candidate’s name and background information in writing to our Secretary at One Apple Park Way, MS: 927-4GC, Cupertino, CA 95014 USA. In addition, our bylaws provide that a shareholder, or a group of up to 20 shareholders, owning at least 3% of our outstanding shares continuously for at least three years, may nominate director nominees constituting up to 20% of Apple’s Board for inclusion in our proxy statement pursuant to our proxy access provisions. Nominating shareholders and nominees must satisfy the requirements set forth in our bylaws, which can be found at investor.apple.com/leadership-and-governance.

Nominees for Election

The following matrix highlights the mix of key skills, qualities, attributes, and experiences of the nominees that, among other factors, led the Board and the Nominating Committee to recommend these nominees for election to the Board. The matrix is intended to depict notable areas of focus for each director, and not having a mark does not mean that a particular director does not possess that qualification or skill. Nominees have developed competencies in these skills through education, direct experience, and oversight responsibilities. The demographic information presented below is based on voluntary self-identification by each nominee. Additional biographical information on each nominee is set out below starting on page 24.

Compensation of Directors

Members of the Board who are not Apple employees (“Non-Employee Directors”) receive compensation for their service. As an Apple employee, Mr. Cook, our CEO, does not receive compensation for his service as a Board member. The Compensation Committee annually reviews the total compensation of our Non-Employee Directors and each element of our Non-Employee Director compensation program. As part of this process, the Compensation Committee evaluates market data provided by its independent compensation consultant, Pay Governance LLC (“Pay Governance”), and makes a recommendation to the Board. The Board determines the form and amount of Non-Employee Director compensation after reviewing the Compensation Committee’s recommendation. The Apple Inc. Non-Employee Director Stock Plan (“Director Stock Plan”) provides for an annual limit of $1.5 million for all compensation paid to a Non-Employee Director.

Cash Retainers. Our Non-Employee Directors receive an annual cash retainer of $100,000. In 2021, the Chairman of the Board, Dr. Levinson, received an additional cash retainer of $200,000; the Chair of the Audit Committee, Dr. Sugar, received an additional cash retainer of $35,000; the Chair of the Compensation Committee, Ms. Jung, received an additional cash retainer of $30,000; and the Chair of the Nominating Committee, Ms. Wagner, received an additional cash retainer of $25,000. All retainers are paid in quarterly installments.

Equity-Based Awards. A substantial portion of each Non-Employee Director’s annual retainer is in the form of equity awards. Under the Director Stock Plan, Non-Employee Directors are granted restricted stock units (“RSUs”) on the date of each annual meeting of shareholders (each, an “Annual Director Award”). All Annual Director Awards vest on February 1 of the following year, subject to continued service on the Board through the vesting date. For 2021, the number of RSUs underlying each Annual Director Award was determined by dividing $250,000 by the per share closing price of Apple’s common stock on the date of grant.

A Non-Employee Director who is newly appointed to the Board other than in connection with an annual meeting of shareholders will receive a grant of RSUs upon appointment (an “Initial Director Award”), except that a Non-Employee Director who first joins the Board on or after February 1 of a particular year and prior to the annual meeting for that year, or a director who was an employee of Apple immediately prior to first becoming a Non-Employee Director, will not receive an Initial Director Award. The number of RSUs subject to each Initial Director Award is determined in the same manner as described above for Annual Director Awards, but the award is pro-rated based on the portion of the period that has passed since the last annual meeting. Initial Director Awards are scheduled to vest on the next February 1 following the grant of the award.

Each RSU granted under the Director Stock Plan will be credited with an amount equal to any ordinary dividend paid by Apple, multiplied by the total number of RSUs subject to the award that are outstanding immediately prior to the record date for such dividend. The amounts credited to each RSU are referred to as “dividend equivalents.” Any dividend equivalents credited to RSUs granted under the Director Stock Plan will be subject to the same vesting, payment, and other terms and conditions as the RSUs to which the dividend equivalents relate. The dividend equivalents are meant to treat the RSU award holders consistently with shareholders.

Equipment and Matching Gifts Programs. Apple has an equipment program for the Board under which each Non-Employee Director is eligible to receive, upon request and free of charge, one of each new product introduced by Apple, and is eligible to purchase additional equipment at a discount. Additionally, each Non-Employee Director is eligible to participate in Apple’s matching gifts program to the same extent as Apple employees.

Deferred Compensation Plan. We adopted the Apple Inc. Deferred Compensation Plan (“Deferred Compensation Plan”) in 2018, effective for deferrals beginning in 2019. The Deferred Compensation Plan allows eligible participants, including our Non-Employee Directors, to defer a portion of their eligible compensation, subject to the terms of the Deferred Compensation Plan. The Deferred Compensation Plan is unfunded and unsecured. We do not provide any matching contributions under the Deferred Compensation Plan or allow for deferral of RSUs. None of our Non-Employee Directors participated in the Deferred Compensation Plan in 2021.

Stock Ownership Guidelines. Apple has stock ownership guidelines for our CEO, executive officers, and Non-Employee Directors. Under the guidelines, each Non-Employee Director is expected, within five years after the individual first becomes subject to the guidelines, to own shares of Apple’s common stock that have a value equal to five times their annual cash retainer for serving as a director. Shares may be owned directly by the individual, owned jointly with, or separately by, the individual’s spouse, or held in trust for the benefit of the individual, the individual’s spouse, or the individual’s children. Other than Ms. Lozano and Mr. Gorsky, who joined the Board in calendar year 2021, each Non-Employee Director currently owns shares of Apple’s common stock that have a value at least equal to five times their annual cash retainer.

Director Compensation—2021

The following table shows information regarding the compensation earned or paid during 2021 to Non-Employee Directors who served on the Board during the year. Mr. Cook’s compensation is shown in the table entitled “Summary Compensation Table—2021, 2020, and 2019” and the related tables under the section entitled “Executive Compensation.” Ms. Lozano joined the Board in January 2021, and Mr. Gorsky joined in November 2021 after the end of the fiscal year.

Executive

Officers

This section describes the business experience of our executive officers, other than Mr. Cook, whose biography can be found on page 24.

Kate Adams   Senior Vice President, General Counsel and Secretary

Ms. Adams, 57, oversees all legal matters, including corporate governance, intellectual property, litigation, compliance, global security, and privacy.

Kate joined Apple as General Counsel in November 2017. Prior to joining Apple, Kate served as General Counsel of Honeywell International Inc., a diversified technology and manufacturing company, from September 2008. Prior to joining Honeywell in 2003, Kate was a partner at the law firm of Sidley Austin LLP.

Luca Maestri   Senior Vice President, Chief Financial Officer

Mr. Maestri, 58, oversees Apple’s accounting, business support, financial planning and analysis, treasury, real estate, investor relations, internal audit, and tax functions.

Luca joined Apple in March 2013 and assumed his current position in May 2014, after previously serving as Apple’s Vice President and Corporate Controller. Prior to joining Apple, Luca was Executive Vice President, Chief Financial Officer of Xerox Corporation, a business services and technology company, from February 2011 to February 2013; Chief Financial Officer at Nokia Siemens Networks; and had a 20-year career with General Motors Corporation, including serving as Chief Financial Officer of GM Europe and GM Brazil.

Deirdre O’Brien   Senior Vice President, Retail + People

Ms. O’Brien, 55, oversees Apple’s retail and online teams, and Apple’s People team. As the leader of Apple’s retail and online teams, Deirdre supports their work to enrich the lives of millions of Apple customers every year. In her role leading the People team, Deirdre works to help Apple connect, develop, and care for its employees—and to help those employees do the best work of their lives.

Deirdre joined Apple in July 1988 and assumed her current position in February 2019. Deirdre’s previous positions with Apple include Vice President, People and Vice President, Operations.

Jeff Williams   Chief Operating Officer

Mr. Williams, 58, oversees Apple’s entire worldwide operations, as well as customer service and support. He leads Apple’s renowned design team and the software and hardware engineering for Apple Watch. Mr. Williams also drives the company’s health initiatives.

Jeff joined Apple in June 1998 and assumed his current position in December 2015. Jeff’s previous positions with Apple include Senior Vice President, Operations and Head of Worldwide Procurement. Prior to joining Apple, Jeff worked in a number of operations and engineering roles at IBM from 1985 to 1998.

Executive

Compensation

This section describes the compensation program for our named executive officers and includes the required executive compensation tables.

2021 Named Executive Officer Compensation

Our executive compensation program is designed to motivate and reward outstanding performance in a straightforward, consistent, and effective way, commensurate with Apple’s size, performance, and profitability. The compensation of our named executive officers has three basic components: annual base salary, annual cash incentive, and long-term equity awards.

Annual Base Salary

Base salary is a customary, fixed element of compensation intended to attract and retain executives. When setting the annual base salaries of our named executive officers, the Compensation Committee considers market data provided by its independent compensation consultant, internal pay equity, and Apple’s financial performance and size relative to peer companies.

The annual base salaries for our named executive officers did not change for 2021.

Annual Cash Incentive

Our annual cash incentive program is a performance-based, at-risk component of our named executive officers’ compensation. Variable payouts are designed to motivate our named executive officers to deliver strong annual financial results, while advancing Apple values and key community initiatives.

The financial performance measures and payout opportunities under the annual incentive program did not change for 2021, although the design of the program was enhanced to include a modifier based on Apple values and key community initiatives (“ESG Modifier”), as described below.

2021 Financial Performance Measures and Payout Opportunities

As in prior years, the Compensation Committee chose net sales and operating income, calculated in accordance with generally accepted accounting principles, as the financial performance measures for the 2021 annual cash incentive program. Net sales and operating income continue to reflect commonly recognized key measures of overall company performance and profitability and are drivers of shareholder value creation.

Payouts for our named executive officers under the annual cash incentive program are first determined quantitatively based on an equal weighting of the net sales and operating income performance measures at threshold, target, and maximum performance goal levels. When setting these goals, the Compensation Committee considers factors relevant to the current fiscal year. Financial results from prior years may be used as a reference point, but the Compensation Committee focuses on setting annual goals that reflect current business conditions and expectations and will result in an appropriate pay for performance outcome for the specific fiscal year.

The target payout opportunity for each of the net sales and operating income performance measures is 100% of each named executive officer’s annual base salary. If the threshold performance level is reached for a financial performance measure, the total payout opportunity for that financial performance measure is 50% of the target payout opportunity. If the maximum performance level is reached for a financial performance measure, the total payout opportunity for that financial performance measure is capped at

200% of the target payout opportunity. If the threshold goal is not achieved for a financial performance measure, there is no payout for that financial performance measure. Payouts for our named executive officers under the annual cash incentive program are linearly interpolated for achievement between threshold, target, and maximum performance goal levels.

For 2021, the Compensation Committee considered the likelihood of a range of business scenarios and results that could impact net sales and operating income, including the ongoing uncertainty related to the COVID-19 pandemic and related business conditions, a complex macro-economic and socio-political environment, and the alignment between appropriate payout opportunities and strong financial results at threshold, target, and maximum performance goal levels. The Compensation Committee set rigorous net sales and operating income goals for 2021 that required year-over-year growth at each payout opportunity. Specifically, our 2021 threshold net sales and operating income goals were both above the prior year’s results, while our 2021 net sales and operating income target goals required significant year-over-year growth.

2021 Financial Performance Goals and Results

For 2021 we reported net sales of $365.8 billion and operating income of $108.9 billion, representing a year-over-year increase of 33% and 64%, respectively. These results significantly exceeded the maximum goals for each of the financial performance measures.

ESG Modifier

Beginning in 2021, the Compensation Committee incorporated the ESG Modifier into the annual cash incentive program. The ESG Modifier is based on a holistic evaluation by the Compensation Committee of key accomplishments and actions taken during the year to advance our Apple values: accessibility, education, environment, inclusion and diversity, privacy, and supplier responsibility, and key community initiatives. The Compensation Committee may choose to apply the ESG Modifier to adjust the payout amounts upwards or downwards by up to 10% or determine not to make any adjustments. The Compensation Committee will not apply the ESG Modifier to increase an annual cash incentive payout above the overall cap of 200% of the total target payout opportunity under the program.

The Compensation Committee chose Apple values and key community initiatives as the basis for the ESG Modifier because they represent long-standing, business-relevant environmental, social, and governance principles that reflect Apple’s commitment to promoting values-driven leadership.

2021 Annual Cash Incentive Payouts

Our 2021 net sales and operating income results significantly exceeded the maximum goals set under the annual cash incentive program resulting in a maximum payout for each of our named executive officers equal to 200% of the total target payout opportunity.

Before approving the annual cash incentive payouts, the Compensation Committee reviewed with management the actions and key highlights for 2021 representing progress for each of the Apple values and key community initiatives. The review incorporated an extensive environmental, social, and governance scorecard of qualitative and quantitative actions and measures relevant to the fiscal year and a discussion of continuing areas of opportunity. For example, the Compensation Committee considered the significant commitments and efforts made during 2021 in connection with Apple’s Racial Equity and Justice Initiative, the meaningful actions being taken to build more diverse representation across every part of the business, new strides toward reaching our 2030 carbon neutral goal across our entire business, manufacturing supply chain, and product life cycle, and innovations designed to protect people’s privacy such as app tracking transparency and privacy nutrition labels.

The Compensation Committee previously determined it will not apply the ESG Modifier to increase a payout above the maximum payout opportunity for 2021 and approved annual cash incentive payouts equal to the maximum 200% of the total target payout opportunity for each of our named executive officers. No adjustment was made based on the ESG Modifier and the Compensation Committee did not exercise its discretion to reduce any named executive officer’s annual cash incentive payout based on Apple’s performance or the Compensation Committee’s subjective assessment of each individual named executive officer’s overall performance.

Long-Term Equity Awards

We pay for performance and manage Apple for the long-term. Consistent with this approach and our guiding compensation principles, the majority of our named executive officers’ annual compensation is provided in the form of long-term equity incentives that emphasize long-term shareholder value creation and the retention of a strong executive leadership team through a balanced mix of performance-based and time-based RSU awards.

Performance-Based RSUs

RSU awards with performance-based vesting are a substantial, at-risk component of our named executive officers’ compensation tied to Apple’s long-term performance. The number of performance-based RSUs that vest depends entirely on Apple’s total shareholder return relative to the other companies in the S&P 500 (“Relative TSR”) for the applicable performance period. To earn a target award, Apple must achieve performance at the 55th percentile of the S&P 500. The Compensation Committee chose Relative TSR as it continues to be an objective and meaningful metric to evaluate our performance against the performance of other large companies and to align the interests of our named executive officers with the interests of our shareholders in creating long-term value.

We measure Relative TSR for the applicable performance period based on the change in each company’s stock price during that period, taking into account any dividends paid during that period, which are assumed to be reinvested in the stock. A 20-trading-day averaging period is used to determine the beginning and ending stock price values used to calculate the total shareholder return of Apple and the other companies in the S&P 500. This averaging period mitigates the impact on the long-term Relative TSR results of one-day or short-term stock price fluctuations at the beginning or end of the performance period. The change in stock price value from the beginning to the end of the period is divided by the beginning stock price value to determine TSR.

Time-Based RSUs

RSU awards with time-based vesting align the interests of our named executive officers with the interests of our shareholders by promoting the stability and retention of a high-performing executive team over the longer term. Vesting schedules for time-based awards are generally longer than typical peer company practices, as described below.

Dividend Equivalents

All RSUs granted to our employees in 2021, including our named executive officers, have dividend equivalent rights. The dividend equivalents will only pay out if the time-based vesting and performance conditions have been met for the RSUs to which the dividend equivalents relate.

2021 RSU Results

CEO RSU Vesting

This year marked the 10-year anniversary of Mr. Cook’s tenure as Apple’s CEO and the vesting of the final tranche of the long-term RSU award granted upon his promotion to CEO in 2011 (the “2011 RSU Award”). Mr. Cook earned significant long-term incentives over the course of a decade, aligning his compensation with the extraordinary value created for our shareholders under his leadership.

At grant, the 2011 RSU Award had a time-based vesting schedule with 50% of the RSUs vesting on each of the 5- and 10-year anniversaries of the grant date. The 2011 RSU Award was significantly modified in 2013, at Mr. Cook’s request, to put a portion of the award at risk by applying a performance condition based on Apple’s Relative TSR performance over specified performance periods. The 2011 RSU Award was not modified to include dividend equivalents.

The performance condition for Mr. Cook’s 2011 RSU Award required Apple to outperform two-thirds of the companies that were included in the S&P 500 for the entirety of each performance period in order for 100% of the performance-based RSUs allocated to that period to vest. The 2011 RSU Award only had downside risk to Mr. Cook. It did not contain any upside vesting opportunity above 100% of the target number of RSUs, and there was no interpolation for results between the Relative TSR levels set at the bottom, middle, and top third of companies in the S&P 500.

For the final three-year performance period under the 2011 RSU Award from August 25, 2018 through August 24, 2021, Apple’s Relative TSR was at the 97th percentile of the companies that were included in the S&P 500 for the entire performance period. As a result, 100% of the target 1,120,000 performance-based RSUs for this performance period vested on August 24, 2021. Apple’s total shareholder return during this performance period was 191.83%. On August 24, 2021, Mr. Cook also vested in the remaining 3,920,000 time-based RSUs under his 2011 RSU Award.

Other Named Executive Officer Performance-Based RSU Vesting

During 2021, Mr. Maestri and Mr. Williams each vested in performance-based RSUs that were granted on October 1, 2017. Ms. Adams vested in performance-based RSUs that were granted on November 13, 2017, her date of hire. Between zero and 200% of the target number of these performance-based RSUs were scheduled to vest based on Apple’s Relative TSR percentile ranking for the applicable performance period, with a maximum 200% vesting for performance at or above the 85th percentile.

For the three-year performance period from the beginning of 2018 through the end of 2020, Mr. Maestri and Mr. Williams each vested in 519,080 performance-based RSUs, representing 200% of the target number of performance-based RSUs. Apple’s Relative TSR was at the 99^th percentile of the companies that were included in the S&P 500 and Apple’s total shareholder return during this period was 208.96%.

For the performance period beginning November 13, 2017 through the end of 2020, Ms. Adams vested in 495,856 performance-based RSUs, representing 200% of the target number of performance-based RSUs. Apple’s Relative TSR was at the 99^th percentile of the companies that were included in the S&P 500 and Apple’s total shareholder return during this period was 181.64%.

2021 RSU Awards

All of our named executive officers received equity awards in the form of performance-based and time-based RSUs in 2021. This is the first time Mr. Cook has been granted an equity award since his promotion to the CEO role in 2011. The structure and timing of Mr. Cook’s 2021 RSU award transitions his equity incentives to better align with the performance- and time-based RSUs granted to our other named executive officers. The value used to determine the number of RSUs granted to our named executive officers, other than Mr. Cook, remained consistent year-over-year. The value used to determine the number of RSUs granted to Mr. Cook was determined by the Compensation Committee after taking into consideration the size, performance, and profitability of Apple relative to peer companies, the scope of the CEO role, and Mr. Cook’s performance as CEO.

2021 Performance-Based RSU Awards

Performance-based RSUs were granted to Mr. Cook, Ms. Adams, Mr. Maestri, Ms. O’Brien, and Mr. Williams on September 27, 2020, which was the first day of Apple’s 2021 fiscal year and the first day of the performance period applicable to the awards. These awards have a three-fiscal-year performance period from the beginning of 2021 through the end of 2023.

Subject to the terms of the award agreements, between zero and 200% of the target number of performance-based RSUs will vest on October 1, 2023, depending on Apple’s Relative TSR percentile ranking for the performance period, as follows:

If Apple’s TSR for the performance period is negative, the number of performance-based RSUs that will vest is capped at 100% of the target number of performance-based RSUs regardless of our percentile ranking. If Apple’s Relative TSR percentile ranking is above the 25th percentile and between the other levels shown in the table above, the portion of the performance-based RSUs that will vest is linearly interpolated between the two nearest vesting percentages.

The target number of performance-based RSUs granted to Mr. Cook was determined by dividing $37.5 million by the closing stock price on the date of grant. The target number of performance-based RSUs granted to Ms. Adams, Mr. Maestri, Ms. O’Brien, and Mr. Williams was determined by dividing $10 million by the closing stock price on the date of grant. The grant date fair values of these awards are reported in the “Summary Compensation Table—2021, 2020, and 2019.”

2021 Time-Based RSU Awards

The 2021 time-based RSUs awarded to Mr. Cook, Ms. Adams, Mr. Maestri, Ms. O’Brien, and Mr. Williams were granted on September 27, 2020, which was the first day of Apple’s 2021 fiscal year. Subject to the terms of the award agreements, the vesting schedule for these RSUs is approximately four and one-half years, with three equal installments vesting annually commencing on April 1, 2023 (approximately two and one-half years following the grant date). The April vesting dates for the time-based RSUs were selected to balance the October vesting of the performance-based RSUs and provide regular vesting intervals.

The number of time-based RSUs granted to Mr. Cook was determined by dividing $37.5 million by the closing stock price on the date of grant. The target number of time-based RSUs granted to Ms. Adams, Mr. Maestri, Ms. O’Brien, and Mr. Williams was determined by dividing $10 million by the closing stock price on the date of grant. The grant date fair value for these awards is reported in the “Summary Compensation Table—2021, 2020, and 2019.”

Compensation Committee Judgment and Discretion

The Compensation Committee, consisting entirely of independent directors, reviews and approves the compensation of Apple’s named executive officers and acts as the administering committee for Apple’s employee equity compensation plans.

The Compensation Committee’s executive compensation determinations are subjective and the result of its business judgment, which is informed by the experience of its members and input provided by its independent compensation consultant, our CEO (other than with respect to his own compensation), other members of management, and our shareholders.

Each year, the Compensation Committee conducts an evaluation of Apple’s executive compensation program to determine any appropriate changes. In making this determination, the Compensation Committee may consult with its independent compensation consultant and management, as described below; however, the Compensation Committee makes final decisions regarding the compensation paid to our named executive officers based on its own judgment.

In determining whether to make changes to our executive compensation program, the Compensation Committee may consider a number of factors, including the size, scope, and performance of our business, evolving compensation trends, financial goals, and shareholders’ interests.

The Role of the Compensation Consultant

The Compensation Committee selects and retains the services of its own independent compensation consultant and annually reviews the performance of the consultant. As part of the review process, the Compensation Committee considers the independence of the consultant in accordance with SEC and Nasdaq rules.

During 2021, the Compensation Committee’s independent compensation consultant, Pay Governance, provided no services to Apple other than services for the Compensation Committee, and worked with Apple’s management, as directed by the Compensation Committee, only on matters for which the Compensation Committee is responsible.

At the Compensation Committee’s request, Pay Governance regularly attends Compensation Committee meetings. Pay Governance also communicates with the Compensation Committee or the Chair of the Compensation Committee outside committee meetings regarding matters related to the Compensation Committee’s responsibilities. In 2021, the Compensation Committee generally sought input from Pay Governance on a range of external market factors related to Apple’s compensation programs, CEO pay, environmental, social, and governance performance metrics and other evolving compensation trends, appropriate market reference points, and market compensation data. Pay Governance also provided general observations about management’s recommendations regarding the amount and form of compensation for our named executive officers.

The Role of the Chief Executive Officer

At the Compensation Committee’s request, Mr. Cook provides input regarding the performance and compensation of the other named executive officers. The Compensation Committee considers Mr. Cook’s evaluation and his direct knowledge of each named executive officer’s performance and contributions when making compensation decisions. Mr. Cook is not present during Compensation Committee voting or deliberations regarding his own compensation.

The Role of Shareholders

Shareholders are provided the opportunity to cast an annual advisory vote on the compensation of our named executive officers and have indicated their strong support for the compensation of our named executive officers in each of the past six years. Most recently, 95% of votes cast on the say-on-pay proposal at the 2021 Annual Meeting voted in favor of our executive compensation program. We have ongoing discussions with many of our shareholders regarding various topics, including company performance and strategy, corporate governance, executive compensation, and environmental, social, and governance topics. The Compensation Committee considers these discussions while reviewing our executive compensation program and will continue to consider shareholder feedback and the results of say-on-pay votes when making future compensation decisions.

The Role of Peer Companies

The Compensation Committee reviews and approves peer group composition each year. With the assistance of Pay Governance, the Compensation Committee identified groups of companies to serve as market reference points for compensation comparison purposes for 2021. A primary peer group was developed for reference consisting of U.S.-based, stand-alone, publicly traded companies in the technology, media, and internet services industries that, in the Compensation Committee’s view, compete with Apple for talent. The threshold revenue and market capitalization requirements for a company to be considered for the primary peer group for 2021 were $15 billion and $50 billion, respectively. Based on the above criteria, there were no changes made to the primary peer group for 2021.

Apple Relative to Primary Peers

As shown above, Apple remains considerably larger than the typical company in the primary peer group with approximately five times the revenue and approximately nine times the market capitalization of the median peer company data for each of the screening criterion. Revenue shown is based on the trailing 12 months revenue of each of our peer companies ending closest to our 2021 fiscal year-end. Market capitalization for peer group companies is the amount provided by Bloomberg L.P. as of September 24, 2021, the last trading day of Apple’s 2021 fiscal year.

A secondary peer group of premier companies that have iconic brands or are industry or category leaders, rely on significant research and development and innovation for growth, and require highly-skilled employees was also developed as an additional reference set for the Compensation Committee. Based on the above criteria, Tesla, Inc. was added to the secondary peer group for 2021.

The Compensation Committee considers peer group data provided by its independent compensation consultant and reviews compensation practices and program design at peer companies to inform its decision-making process so it can set total compensation levels that it believes are commensurate with the relative size, scope, performance and profitability of Apple. The Compensation Committee, however, does not set compensation components to meet specific benchmarks as compared to peer companies, such as targeting salaries or total compensation at a specific market percentile. References in this Compensation Discussion and Analysis to peer companies include both the primary and the secondary peer group companies.

Other Benefits

Our named executive officers are eligible to participate in our health and welfare programs, Employee Stock Purchase Plan, 401(k) plan, and matching gifts, vacation cash-out, product discount and other benefit programs on the same basis as other employees. Items or services provided to our named executive officers that may be considered perquisites are limited and generally do not have an associated incremental cost to the company, except as discussed below and as reported in the table entitled “Summary Compensation Table—2021, 2020, and 2019.”

Deferred Compensation Plan. Our named executive officers are eligible to defer a portion of their eligible compensation under the terms of the Deferred Compensation Plan, including a portion of their base salary and annual cash incentive opportunity.

Security and Private Aircraft. We provide risk-based, business-related, and personal security services for our employees, including our named executive officers, as determined to be appropriate by our security team. We consider the security measures provided to our named executive officers to be reasonable and necessary expenses for the benefit of Apple and not a personal benefit. However, in accordance with SEC disclosure rules, the aggregate incremental cost of these services is reported in the “Summary Compensation Table—2021, 2020, and 2019.”

In the interests of security and efficiency based on our global profile and the highly visible nature of Mr. Cook’s role as CEO, the Board requires that Mr. Cook use private aircraft for all business and personal travel. Mr. Cook recognizes imputed taxable income and is not provided a tax reimbursement for personal use of private aircraft.

Compensation Upon Termination of Employment. Our named executive officers do not have employment contracts or severance arrangements. Further, our named executive officers are not entitled to acceleration of their equity awards or any other payments upon a change in control.

The time-based RSU award agreements for all of our employees, other than Mr. Cook, provide for full vesting upon a termination due to death and pro-rata vesting upon a termination due to disability. The performance-based RSU award agreements for our named executive officers, other than Mr. Cook, provide for pro-rata vesting upon a termination due to death or disability. The 2021 time-based RSU agreement for Mr. Cook provides for full vesting upon a termination of employment due to death and a continued right to receive shares upon a termination of employment due to disability or retirement, if termination occurs on or after the first anniversary of the grant date. The 2021 performance-based RSU agreement for Mr. Cook provides for a continued right to receive shares upon a termination due to death, disability, or termination of employment due to retirement if termination occurs on or following the first anniversary of the grant date, unless otherwise determined by the Compensation Committee. Retirement is defined in Mr. Cook’s 2021 RSU award agreements as a termination of employment after reaching at least 60 years of age and at least 10 years of service with Apple. Under the terms of Mr. Cook’s RSU award agreements, if retirement occurs on or following the first anniversary of the grant date, the shares underlying his 2021 RSU award will continue to be released on the original vesting dates, subject to the terms of the award agreements and the attainment of the performance goals for the performance-based RSUs. The delivery of the vested shares underlying Mr. Cook’s 2021 RSU award and any dividend equivalents that have accrued on such RSUs are not accelerated upon retirement. The Compensation Committee approved this provision in Mr. Cook’s 2021 RSU award agreements to recognize the unique impact of his leadership decisions on the long-term direction of the company, and to continue to focus and align his incentives with our other named executive officers’ incentives.

Governance and Other Considerations

Tax Deductibility of Compensation Expense. Section 162(m) of the Internal Revenue Code generally places a $1 million limit on the amount of compensation a publicly held company can deduct in any tax year on compensation paid to each “covered employee” which includes our named executive officers. While the Compensation Committee considers tax deductibility as one of many factors in determining executive compensation, the Compensation Committee will award or modify compensation that it determines to be consistent with the goals of our executive compensation program even if such compensation is not tax deductible by Apple.

Compensation Clawback. The terms of all outstanding RSU awards held by our named executive officers allow us to recoup any shares or other amount that may be paid in respect of RSUs in the event the named executive officer engages in certain acts of misconduct. The compensation recoupment policy also applies to the annual cash incentives awarded to our named executive officers. Apple may recover compensation in the event the named executive officer commits a felony while employed by Apple or, while employed by

Apple or at any time thereafter, the named executive officer engages in a breach of confidentiality, materially breaches any agreement with Apple, commits an act of theft, embezzlement or fraud, or if Apple is required to prepare an accounting restatement as a result of the named executive officer’s misconduct.

Prohibition on Hedging, Pledging, and Short Sales. We prohibit short sales, hedging, and transactions in derivatives of Apple securities for all Apple personnel, including directors, officers, employees, independent contractors, and consultants. In addition, we prohibit pledging of Apple stock as collateral by directors and executive officers of Apple. We allow for certain portfolio diversification transactions, such as investments in exchange funds.

Stock Ownership Guidelines. Under our stock ownership guidelines, Mr. Cook is expected to own shares of Apple stock that have a value equal to 10 times his annual base salary. All other executive officers are expected to own shares that have a value equal to three times their annual base salary within five years of the officer first becoming subject to the guidelines. Shares may be owned directly by the individual, owned jointly with or separately by the individual’s spouse, or held in trust for the benefit of the individual, the individual’s spouse, or the individual’s children. Each executive officer currently holds shares in excess of these guidelines.

Risk Considerations. In establishing and reviewing Apple’s executive compensation program, the Compensation Committee considers whether the program encourages unnecessary or excessive risk-taking and has concluded that it does not. See the section entitled “Corporate Governance–Board Oversight of Risk Management” above for an additional discussion of risk considerations.