OpenAI has reportedly revised its compensation structure by eliminating the six-month vesting cliff for new employees.
Encouraging Talent To Take Risks
According to a report by The Wall Street Journal on Sunday, this policy change, announced by applications chief Fidji Simo, aims to encourage new hires to take risks without the fear of being dismissed before their equity vests.
Previously, OpenAI had already reduced its vesting period to six months from the typical industry standard of 12 months back in April.
The adjustment reflects the intense competition for top-tier technical talent within the AI sector, with companies like Meta Platforms Inc. (NASDAQ:META), Alphabet Inc.'s (NASDAQ:GOOG) (NASDAQ:GOOGL) Google, and Anthropic offering lucrative pay packages to attract skilled researchers and engineers.
Earlier this month, OpenAI's chief research officer, Mark Chen, revealed that Meta CEO Mark Zuckerberg personally homemade soup for talent he wanted to recruit for his company's AI efforts.
Projected ESOP Cost
According to the report, OpenAI is projected to spend $6 billion this year on stock-based compensation, nearly half of its expected revenue.
In a similar vein, Elon Musk’s xAI also made changes to its vesting policy earlier this year, shortening the vesting period to attract more recruits amidst a challenging hiring environment.
See Also: Trump Signs Executive Order Targeting ‘Excessive State Regulation’ of AI
OpenAI’s Recent Developments
OpenAI employees considered selling $6 billion worth of shares to investors like SoftBank Group Corp. (OTC:SFTBY) and Thrive Capital, potentially boosting the company’s valuation to $500 billion.
Additionally, OpenAI announced a $1.5 million bonus for all employees, including new hires, over two years. This move is seen as a response to the “Zuck Poaching Effect,” as Meta Platforms and other tech giants aggressively seek top talent.
Furthermore, OpenAI is working on a new device prototype with a design described as “simple, beautiful, and playful” by CEO Sam Altman. This highlights the company’s commitment to innovation and maintaining its leadership in the AI field.
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