On March 11th, Interface News learned that Alibaba Group announced the upgrade of its equity incentive policy to employees through internal emails.
This email shows that starting from April 1, 2024, in order to improve the certainty and liquidity of employee compensation income, adjustments will be made to the equity incentive policy: in addition to one-time year-end bonuses and equity, "long-term cash" will be introduced as one of the incentive methods, and newly awarded performance and promotion stocks will be adjusted to a "stock+long-term cash model".
Alibaba will also adjust and accelerate its pace in terms of equity ownership and distribution frequency. Starting from April 1, 2024, newly granted and promoted stocks will be assigned 1/16 per quarter instead of 1/4 per year. This measure can provide employees with incentives in a short period of time, even if they resign less than a year after the stock is granted, they can still receive corresponding partial incentives.
A person close to Alibaba confirmed the above adjustment to Interface News. The person pointed out that the new changes mainly involve transforming the original pure equity incentives into a combination of equity and long-term cash, shortening the equity ownership cycle, and increasing the liquidity of employee income.
In the past, long-term equity incentive was widely adopted by Internet giants. Allowing employees to receive stock options year by year is beneficial for maintaining team stability and employee motivation, as well as leaving enough capital for the company.
For example, Alibaba Group has equity in certain positions and above, which can only be exercised after one year of employment. Generally, the ownership ratio is 0%, 50%, 25%, and 25% for four years. After that, in addition to salary increases, there will be additional stock grants for performance or promotion each year, with a uniform rate of 1/4 ownership for four years.
Now, these incentive stocks can be combined in the form of "equity+long-term cash", which includes pure stocks, pure long-term cash, or equity+long-term cash to increase flexibility.
Compared to the end of 2020, Alibaba's stock price has fallen from a high of over $300 to the current level of around $70. For employees, the sluggish stock price limits the incentive effect of long-term bundling.
Jack Ma's office has stated that Alibaba's stock price is undervalued, while emphasizing that founder Jack Ma has confidence in Alibaba's long-term development. Since last year, including Jack Ma, Chongxin Cai, and Alibaba Group, they have all announced the expansion of the repurchase scale of Alibaba stocks.
By launching a combination of equity and long-term cash, the company hopes to attract employees who are interested in cash income and retain employees who are optimistic about Alibaba's future development, thereby improving recruitment flexibility. But while motivating and improving, it also means that Alibaba will directly send more money to its employees in the future.
This equity incentive adjustment is consistent with the previously exposed human resources system reform ideas of Taotian: further subdividing the original P sequence at the hierarchical level, so that employees can see rapid positive results in promotion. The increase in levels has led to an increase in promotion opportunities compared to the past.
Regarding the change in incentive policies, an Alibaba employee commented to Interface News, "The original stocks are not suitable for the new regulations, but if they switch jobs or are laid off, the losses will be smaller, better than nothing."
The following is the original text of the internal email:
The FY24 performance and annual incentives have been launched, and a new fiscal year is also approaching. In order to improve the certainty and liquidity of employee compensation income, the group has made several adjustments to Alibaba's (AGH) equity incentive policy. We hereby communicate with everyone.
1、 Adjustment of incentive tools
Starting from April 1, 2024, newly awarded performance and promotion equity incentives will be adjusted to a combination of "equity+long-term cash". Each business will develop its own policies based on its own situation.
2、 Adjustment of belonging rhythm
Starting from April 1, 2024, newly awarded performance and promotion awards will accelerate the frequency of attribution and distribution. The original annual attribution will be adjusted to quarterly attribution, with 1/16 of the total attribution for each full quarter.
The above communication applies to businesses that use Alibaba (AGH) equity incentives.