Tesla skips merit-based stock awards, squeezing staff compensation

SAN FRANCISCO – Tesla managers told some salaried employees the company is not offering merit-based equity awards in 2023.

The company did not give a reason for the change, but four employees from different departments told Bloomberg they believe the move was widespread.

Workers still received modest cost-of-living increases and adjustments to their base salaries.

During annual performance reviews, employees usually get salary adjustments as well as merit-based stock grants on top of their existing equity.

But in 2023, even high performers did not get the merit-based grants, the employees said.

Some Tesla employees who reached the end of their four-year vesting cycle were still given stock “refreshers”, in order to keep their total compensation competitive.

It is not clear if this is a one-time aberration or part of a larger shift in Tesla’s compensation philosophy that takes a more targeted approach to awarding equity grants.

Tesla, which has 140,000 employees globally, did not respond to inquiries.

The company has made changes to how it compensates workers in the past.

Tesla chief executive Elon Musk has long stressed the importance of employee stock ownership.

The use of those grants has allowed the electric vehicle (EV) maker to keep total pay high while preserving cash, and Mr Musk has credited the compensation method with helping him fend off unionisation pushes.

“The challenge is: How do we retain great people to do the hard work of building cars when they have, like, six other opportunities that they can do that are easier?” Mr Musk said at the New York Times DealBook Summit in November. “We certainly try hard to ensure the prosperity of everyone. We give everyone stock options.”

Equity awards, usually in the form of restricted stock units, have historically motivated workers to stick with Tesla over rivals.

New employees are typically offered a base salary and stock grants that vest over four years, meaning they sacrifice potentially large payouts if they leave the EV maker after a short time.

Mr Musk, who is the world’s richest person, has spent much of 2023 signalling that he is worried about the global economy.

He has railed against the US Federal Reserve for high interest rates, and on Tesla’s third-quarter earnings call warned about commercial real estate being in “terrible shape” and rising credit card debt.

Tesla chief financial officer Vaibhav Taneja said on the same results call the company was focusing on cutting costs as it navigates a “challenging economic environment”. BLOOMBERG

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