The steep decline in Amazon.com Inc.'s stock over the past year is roiling the technology company’s stock-heavy compensation plan, resulting in employee pay coming in significantly lower than target compensation, according to people familiar with the matter.
Amazon pays its corporate employees a large chunk of their annual salaries in restricted stock units, and a prolonged slump in the company’s shares is causing pay for 2023 to be between 15% and 50% lower than the projected targets Amazon gave to employees, some of the people said.
“Our compensation model is intended to encourage employees to think like owners, which is why it connects total compensation to the company’s long-term performance,” an Amazon spokesman said in an emailed statement. “That model comes with some year-to-year upside and risk because the stock price can fluctuate, but historically at Amazon, it’s had a history of working out very well for people who’ve taken a long-term view.”
Amazon has historically given less base-pay compensation to employees than its big-tech peers but made up the difference with stock awards that vest over several years. Employees say the longer an Amazon employee stays with the company, the more their compensation can depend on stock awards, with stocks making up 50% or more of total income for some.
Over the past year, Amazon’s shares have declined more than 35% amid a broader technology slowdown and slower growth on Amazon’s retail side of the business. When Amazon issues restricted stock units to employees, it is predicated on the longstanding assumption shared in compensation conversations that Amazon’s shares would appreciate at least 15% each year, the people said.
Until recently, that had largely been true. Between 2017 and early 2022, the stock price increased on average about 30% each year. But Amazon’s stock is currently trading around $96 per share and some employee pay packages are structured under the assumption that Amazon’s shares would be around $170 per share, some of the people said.
Because of the decline, Amazon’s human-resources team recently sent training documents to managers about how to communicate what effectively amounts to a pay cut to its employees, according to training materials reviewed by The Wall Street Journal. According to the materials, managers should focus on employees being invested in the long-term performance of the company and hold on to the restricted stock longer until there is a recovery in the company’s stock price.
At a recent all-hands meeting at Amazon’s Seattle headquarters, Amazon Chief Executive Andy Jassy addressed the situation, according to a recording of the meeting reviewed by the Journal. “I know that this is and feels like a really difficult time. We have a very uncertain economy, we just had to say goodbye to 18,000 of our teammates, the market is in a funky spot,” he said, adding that Amazon and other companies have seen an impact on their stock prices. “The result is compensations are impacted. And that is difficult. All of that is difficult. But I am quite optimistic that we have the chance to emerge from this challenging time in a relatively stronger position than we entered it.”
Last year, amid a war for talent and a slumping stock price, Amazon raised the cap for the cash component of Amazon salaries from $160,000 to $350,000. This year, the company plans on issuing raises from 1% to 4%, according to some of the people. The company won’t issue more restricted stock to employees to help them meet their target compensation for this year, some of the people said.
Amazon is in the midst of one of the toughest financial stretches in the company’s history. In November, it began the largest round of layoffs the company has ever deployed as Amazon adjusted to weakening retail demand coupled with years of mass hiring. By January, the company had laid off 18,000 corporate employees, the highest number of any technology company in this recent wave of layoffs.
The number added to other cuts made across the tech industry. Companies large and small have laid off workers in recent months, including at Alphabet Inc.’s Google, Meta Platforms Inc. and Microsoft Corp. Since the start of the year, more than 107,000 employees have been laid off across the tech sector, according to Layoffs.fyi, which tracks layoffs.
In addition to eliminating current positions, Amazon also rescinded job offers from some candidates who had accepted them and hadn’t yet started, and delayed the start date for some incoming college hires by six months. The Information earlier reported the rescinded offers.
“As part of our annual operating plan review process and in light of the challenging economic conditions, we made the difficult decisions to eliminate some roles in particular businesses for which we had extended offers but the candidates had not yet joined the company, and to delay start dates for some of our college hires by up to six months,” said the Amazon spokesman in a statement.
The company recently announced plans to require workers to be in the office at least three days a week by May 1, shifting from a policy that enabled team directors to decide how often staff would be in the office.