Even Executive Pay Is Being Disrupted at Tech Giants Like Amazon

Amazon.com Inc., Alphabet Inc., and Facebook Inc. have upended the establishments in retailing, advertising, and media—so it may not come as a surprise that their pay plans are unusual too.

The three set themselves apart from other S&P 500 companies by paying bosses almost exclusively in stock grants that are free from any links to performance goals. The vast majority of the biggest U.S. companies tie most of their top executives’ pay to targets disclosed in regulatory filings, according to the Bloomberg Pay Index.

Paying in stock rather than cash helps boards align management rewards with performance and tying those grants to specific financial or operational milestones can reinforce that approach. Yet for businesses in hot industries like tech, boards may prefer plans that don’t reveal company targets and that help retain highly sought-after executives by guaranteeing their potential payouts.

Amazon avoids linking compensation to performance criteria because doing so “could cause employees to focus solely on short-term returns at the expense of long-term growth and innovation,” according to a filing. Google parent Alphabet also grants equity every other year, a strategy it has said “encourages executives to take a long-term view.”

Shares awarded to Facebook founder Mark Zuckerberg’s four top lieutenants in 2015 made up more than 80 percent of their total pay, compared with an average of 60 percent for S&P 500 CEOs, according to data compiled by Bloomberg. They will be fully vested by 2021 as long as the four remain employed by the company, a filing shows.

Vesting periods of at least four years are necessary for companies that rely exclusively on time-based stock awards to “gear individuals toward taking a longer-term view,” said Aalap Shah, managing director at executive pay firm Pearl Meyer. An absence of metrics from pay plans hardly means that executives don’t have goals they must achieve to get paid, Shah said.