Elon Musk yet to release details of stock-based compensation plan to Twitter employees: report

In an email to Twitter employees in November, Musk had promised that the company would ‘continue to provide stock and options as part of our ongoing compensation plan’, CNBC reported in November last year.

The Tesla CEO had mentioned then that the stock plan would be similar to that of SpaceX – another company run by him.

Here is what Musk wrote in the mail:

Even though Twitter is now a private company we absolutely will continue to provide stock and options as part of our ongoing compensation plan.

The stock plan will be much like that of SpaceX, which has been very successful. As with SpaceX, exceptional amounts of stock will be awarded for exceptional performance.

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Thanks,
Elon

At SpaceX, employees are granted stock options twice a year, on May 15 and November 15.

Twitter faces a potential exodus of employees after February 1, the day when they can cash out stock awards they held before Musk’s takeover of the company in October last year, the report said.

Employees awarded Twitter stock before the takeover that hadn’t vested when the deal closed, and that was scheduled to vest on February 1, will be paid out at Musk’s $54.20 buyout price in cash, according to company filings, The Information reported.

“Another wave of staff departures may actually suit Musk, given the salary costs that will evaporate along with it. Musk has told senior leaders he thinks the company is still too big, according to a person with direct knowledge, even after cutting more than three-quarters of Twitter’s staff, to around 2,000 employees,” The Information report said.

Esops and how they work?

Stock options have become an even more important reason for Twitter employees to stay given the rigorous work environment at the company, which Musk said the employees must accept.

In recent years, employee compensation has gone beyond the conventional salary package, at least at startups and other tech firms. Employee stock options are increasingly in demand at these firms as more workers seek to benefit from companies’ long-term growth.

For companies, employee stock ownership plans (Esop) are a way of attracting and retaining the best talent by pegging a part of their compensation to the company’s stock price.

A stock option is simply a contract that gives a person investor the right, but not the obligation, to buy or sell a stock at an agreed-upon price and date.

Also read | ETtech Explainer | What are Esops and what do they mean for employees and employers?

Esops thus allow employees to buy a set number of company shares at a set price after the vesting period has expired (typically a few years). This means employees must work for the company for a certain number of years before they can exercise their stock options.

Once the vesting period is over, the company facilitates a buyback exercise in which employees can liquidate their shares and create wealth.