In a noteworthy alteration to its compensation model, Tesla Inc. TSLA has reportedly halted the issuance of merit-based equity awards to its salaried workforce this year.
What Happened: As reported by Bloomberg on Tuesday, the EV giant has not clarified the reasoning behind this change. Four employees from different departments suspect that this decision is company-wide. While employees have received minor cost-of-living increases and base salary adjustments, the company has omitted merit-based stock grants this year, typically distributed during annual performance evaluations.
The EV manufacturer has not commented on whether this is a singular event or a broader shift in its compensation strategy. This change comes despite Elon Musk, Tesla’s CEO, consistently advocating for employee stock ownership as a crucial tool for sustaining high total payment while preserving cash and warding off unionization attempts.
Historically, equity awards have been instrumental in incentivizing employees to prefer Tesla over its competitors. Musk, currently the world’s wealthiest person, has voiced concerns about the global economy throughout 2023. Vaibhav Taneja, Tesla’s CFO, previously mentioned during an earnings call that the company was focusing on cost reduction in light of a “challenging economic environment”.
Why It Matters: This move comes on the heels of Tesla’s decision to increase the salaries of its hourly workers at the Nevada Gigafactory. These pay raises, termed "cost of living adjustments," were to reflect a 10% or more increase for most hourly workers, starting in early January.
The decision to halt merit-based stock grants also follows reports of challenging working conditions at Tesla. Employees have described long hours and intense work environments.
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