- Tech salaries took a hit in 2022.
- Insiders say tech bottom lines will take a beating too as companies look to hang on to talent.
Tech companies spent last year finding ways to keep their employees happy and calm in the midst of perk cuts and layoffs. Now, insiders say they expect firms to issue more stock and cash incentives to keep their C-suite intact too.
Top technology stocks thrived in 2020 and 2021 from the sudden pandemic-prompted shift to digital. But fortunes changed when 2022 rolled around, with stock values falling.
Insiders say that tech companies in 2023 will be looking to structure long-term deals with payouts for longevity as a way to induce executive loyalty.
Five of the biggest tech stocks, Apple, Microsoft, Alphabet, Amazon, and Meta, lost an aggregate value of $3.7 trillion in 2022. A slumping stock doesn't just hurt the shareholders; it also hurts employees who have a portion of their compensation package paid in equity. Tech companies doled out additional shares to shore up employees whose stock lost its value last year, so much so that investors worried about future returns.
Other companies, such as Shopify and Netflix, opted to allow employees to have more control over their compensation packages by choosing how much of their salary is cash versus equity every year.
Deepali Vyas, a top headhunter at Korn Ferry, told Insider there's going to be a recalibration of exec cash compensation downward to a level that reflects where valuations are today.
"I would see those levels come down anywhere between 10 and 20%," she said.
As the Federal Reserve continues to raise rates to combat inflation, companies' boards of directors and shareholders will be asked to get creative with compensation packages to satisfy spooked employees, including leaders, who are seeing tech-boom benefits be scaled back and are shouldering more work because of layoffs.
Competitors from within the sector and beyond have been ready to nab Big Tech talent at a more realistic, yet still competitive price, Vyas added.
Since this is the worst time to lose top-tier talent like an exec who hits their marks, Vyas said, she expects to see companies create long-term, metric-based incentives in which cash or equity is paid out in a few years or more.
To measure who gets a promise of a big payday for sticking around, companies will be looking at what kind of holding power they have on each person they're looking to keep, said Aalap Shah, a managing director at the advisory firm Pearl Meyer.
"Looking at their unvested equity holdings and determining what the value of that is currently gets you an understanding of how much value the executive is being retained by and if that is a meaningful enough value," Shah told Insider.
For execs who hit that bar, even with a tempting job market opening up say over the next few years, it could be more profitable to stay put.