(NewsNation) — For decades, high-tech companies have paid employees with both money and equity: stock options, stock for meeting performance goals, stock purchase plans or paying a portion of salary in stock. That’s no longer working out for Zoom Video Communications, which is scaling back the practice, calling it “not sustainable.”
“We grant a significant amount of shares each year that has led to very high dilution,” said Zoom CEO Eric Yuan in a memo to employees first reported by Bloomberg. “Put simply, we are granting too much equity and must proactively reduce it.”
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Zoom joins Salesforce, Workday and Service Now to reduce stock dilution caused by stock-based compensation. Yuan said the practice, known as the “annual performance equity plan,” will be phased out over the next two fiscal years beginning in February.
He wrote that Zoom will also reduce the equity granted to new hires and compensate with higher cash bonuses.
Zoom stock has been riding the boom created by COVID-mandated remote work, and the bust when people started returning to their offices. Trading for about $500 a share in late 2020, Zoom stock fell to a record low of $55.22 last month. It closed on Friday at $67.53.
