Amazon to trim employee equity compensation in an economic downturn

Amazon may trim employee stock awards as the Seattle-based e-tailing giant faces an increasingly bleak economic outlook, according to a recent internal memo. 

Amazon will reduce its restricted stock units starting in 2025 due to budgetary constraints, according to the memo. Additionally, it hinted at a potential change to the pay model which could offer staff more cash to offset any potential stock price crisis, Insider reported. 

August Aldebot-Green, an Amazon spokesperson, confirmed the accuracy of the memo with Insider. But the change in Amazon’s broader pay structure is a possibility, not a definite plan, and the company’s compensation philosophy “remains unchanged.”

The company said that it has decided to reduce RSU awards by a small amount in the final outlook year, while leaving other years unaffected, after finalizing compensation this year and evaluating its future incentive system, according to Amazon’s internal message obtained by The Post.

“This change to the final outlook year [2025] gives us more flexibility to potentially adjust the combination of base and equity when we review that outlook year during the next compensation cycle,” the message said. 

Amazon used stock grants to attract talent instead of offering high base cash pay, a strategy that worked well when its shares surged from 2009 to 2021. However, the stock value, which has plummeted roughly 35.94% over the past year, diminished the value of RSUs as an employee retention tool. 

The e-commerce giant’s decision to decrease RSUs awarded to employees contrasts with the record amount issued in 2022. That year, Amazon disclosed $19.6 billion in stock-based compensation, up 54% from the previous year and double the level of 2020. The increase in stock-based compensation was seen across other tech companies, but analysts called the trend “completely unsustainable” due to potential dilution of future profits.

Many departing staff have cited low base cash pay as their primary reason for leaving, and some employees put a higher value on a package with 75% cash and 25% equity, versus those with a lower cash component, according to Insider. 

In an effort to alleviate some of these concerns, Amazon doubled its base salary cap to $350,000 last year, more than twice the previous cap of $160,000, The Post previously reported. 

Currently, Amazon seems to be proceeding cautiously with the 2025 stock grants. As per an employee compensation statement reviewed by Insider, the 2025 stock grant section is blank, indicating that certain RSU plans are still pending.

Despite this, Amazon maintains an optimistic outlook on its future stock performance. According to the employee compensation statement, Amazon has factored in a presumed 15% increase in stock price for both 2024 and 2025.