When the going's good at Amazon, employees certainly get their cut. But when shares slump—and Amazon's have fallen by around 35% in the past year—staff's incomes can take a hit.
According to a report from the Wall Street Journal, corporate staff at Amazon get a chunk of their wages from restricted stock units. Yet because Amazon's share price was so underwhelming in 2022—down almost 50%—pay packets may sink anywhere between 15% and 50% below compensation targets, according to sources familiar with the matter.
This drop comes after CEO Andy Jassy issued a rallying cry to his remaining workforce following the January announcement of 18,000 layoffs. According to leaked audio heard by Insider, Jassy said turning the company around will take “many months” and moves will likely be “misunderstood” by the market.
In his speech Jassy also encouraged staff to think like "owners" of the business, a sentiment echoed by a spokesperson who responded to Fortune's request for comment.
“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," the Amazon spokesperson said in a statement to Fortune. "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.”
A report published last week also dubbed Jassy as one of the most "overpaid" CEOs in the U.S. after it was revealed he took home a total of $212.7 million, while the median Amazon worker receives $32,855. His "excess pay" component accounted for $197.3 million of the total, according to the report from shareholder advocacy As You Sow published Thursday.
Unlike its Big Tech peers Google and Apple, Amazon reportedly offers lower salaries but makes up a competitive offer through stock options. It also seems like relatives veterans at the organization could be hit worse by the share depreciation, with employees saying that the longer they stay at the company the more their compensation is dependent on stock awards. For those who have been with the online behemoth the longest, up to 50% of their total income is balanced on market outcomes.
Materials viewed by the Wall Street Journal also reveal Amazon's HR team has been getting in touch with managers and issuing documentation on how to handle conversations around the effective pay cut.
People added that the compensation scheme is based on the assumption that the share's value will appreciate 15% every year. In the past that has rung true. In 2015 shares rose 117%, 11% in 2016, 56% in 2017, 28% in 2018, 23% in 2019 and 76% in 2020, according to research platform Macrotrends.
The last two years have not been as rosy for Amazon's stock price. It fell 2.3% in 2021 and a whopping 49.5% last year.
Not all bad news
The good news for employees is that Amazon has rallied in 2023—up just over 13% at the time of writing. Experts are convinced it's a trend set to continue: "I struggle to see a company like Amazon not bouncing back from a decline of this magnitude," Craig Erlam, a senior market analyst for OANDA, told Fox Business.
He added: "Sentiment towards tech stocks takes a little longer to settle, but things should become much clearer over the next few months in respect to the economy and interest rates, at which point attitude towards tech could be very different."
The so-called 'war for talent' pushed Amazon to reexamine its cash offering in 2022, seeing it raise the component cap within salaries from $160,000 to $350,000. Some of those interviewed by the Wall Street Journal added that this year the company is considering further raises of between 1% and 4% as inflation pressures continue to mount.
However, they added, the shortcoming in share income won't be offset in further restricted stocks being given to staff.
