Cook, who has presided over a 42 percent drop in Apple's share price since it touched a high of $705 in September, approached the board to impose a performance criteria on his yet-to-be-vested stocks, according to a filing on Friday.
Under the new system, part of Cook's grant is subject to "Total Shareholder Return", a measure of Apple's stock performance and dividends based on public Standard & Poor's data.
The company's board had in January of 2012 granted Cook one million restricted stock units (RSUs) to signal its confidence in Cook after Steve Jobs turned over the helm of the iPhone and iPad maker to his long-time lieutenant in August of 2011.
"In outreach discussions this year with many of our largest shareholders, we heard that they believe it is appropriate to attach performance criteria to a portion of our future executive stock awards that have been entirely time-based in the past," the filing said.
Apple, beginning Friday, is also including a performance element in new stock awards to all top executives.
Shares of Apple, once among the most desirable of portfolio holdings, fell out of favor abruptly last September on growing uncertainty about the company's ability to fend off unprecedented competition from deep-pocketed rivals such as Samsung Electronics (005930.KS), Amazon.com (AMZN.O) and Google Inc (GOOG.O).
Under Cook, the company has gone through one of its longest recent product droughts, with no new devices. The last device launched was the iPad mini last October, the first all-new product under Cook.
Cook's stock award was previously based on a pre-determined time-based vesting schedule of 10 years. Now of the 1 million, a block of 100,000 shares each will vest in 2016 and 2021.
The rest of the 800,000 shares will vest equally every year, over 10 years and will be subject to the performance criteria.
Half of the 800,000 is subject to the performance of Apple shares. The other half will vest on an annual basis as long as Cook remains with Apple.
Apple said in its filing Total Shareholder Return for a period of time is based on the change in its stock price during that period, taking into account any dividends paid, which are assumed to be reinvested in the stock.
(Reporting By Poornima Gupta; Editing by Bernard Orr)
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