A pandemic-fueled hiring frenzy, followed by a dramatic stock-market collapse, is piling pressure on the compensation strategies of public tech companies such as Roku, Uber, Pinterest, and even Amazon.
Engineers and other workers have been wooed in recent years with generous chunks of equity, known as restricted stock units, or RSUs. The awards are often valued based on the market price on the day they're granted.
That worked great when tech stocks were rising. But now that the sector has slumped, many companies are being forced to issue millions of extra shares just to keep employees' stock compensation at the same level as in previous years. That's diluting shareholders.
Amazon is the highest-profile example of this. In the second quarter, the internet giant is on pace to spend a record $6 billion on stock-based compensation, up 66% from the same period last year. In the first quarter of this year, the company granted 1.4 million RSUs, more than double in the same period of 2021, according to an Insider analysis of regulatory filings.
Other companies, including Snap, Pinterest, Wayfair, Uber, and DoorDash, doubled or even tripled the number of RSUs granted in the same time frame. Roku's RSU grants surged in the first quarter, up more than 3,000% from a year earlier.
"It is completely unsustainable," said Aalap Shah, a managing director at Pearl Meyer who advises companies on compensation plans. "It's really affecting some of the smaller companies, but even some of the larger companies because there always seems to be someone larger or willing to go deeper."
Every increase in the number of RSUs can dilute investors even more. The chart below shows the jumps in RSUs granted in Q1 of 2021 versus Q1 of 2022 for major tech companies.
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