Summary of Key Points
Recently, the tech industry (in areas such as AI, semiconductors, and robotics) has seen a surge in "equity incentives leading to wealth creation": Some employees have earned millions or even hundreds of millions in profits through stock options, while others have seen their wealth shrink due to a halving of the company's stock price after going public. Equity incentives are not available to all employees; they primarily benefit those who hold core technical or business roles. This trend reflects a structural shift in the tech industry's compensation system from "salary + bonus" to "salary + bonus + equity." However, realizing the value of stock options requires overcoming three hurdles: the company's stock price rising, the employee remaining in the company, and meeting performance targets. Moreover, there are numerous disputes and risks associated with these incentives.
1. The Myth of Easy Wealth Creation is Alluring, but Wealth Can Also Disappear Quickly
On one hand, there are stories of substantial wealth creation: In the early days of Cambricon, the average equity value per of the 124 employees was 5.57 million yuan, and at Zhongji Xuchuang, 69 key employees earned over 5.8 million yuan in profits (with the cost of one yuan increasing to a market value of 36 yuan). On the other hand, there are cases where the wealth quickly evaporates: On the first day of its public offering, the market value of the shares held by employees at Yushu Technology was 500 million yuan per person, but four days later, the stock price halved, resulting in a nearly 50% loss of wealth.
Key Reminder: Most of this "wealth" is "paper profit"; it is only real if sold. A slight fluctuation in the capital market can change these figures dramatically.
2. Equity Incentives Are Not a Universal Benefit; Core Talent Is the Priority
Not all engineers receive stock options. Companies allocate shares to those they need to retain the most:
- Cambricon's incentive program covered 85% of its employees, all of whom were in core technical or business roles.
- At Yushu Technology, 12 R&D professionals and 2 sales/production executives held the majority of the shares.
- In Zhongji Xuchuang's fourth incentive round, no executives were included; all recipients were from key positions.
Company Logic: Shares serve as a measure of an employee's value to the company; those who create more value receive more shares.
3. Realizing the Value of Stock Options Is Not Easy
To convert stock options into cash, employees must overcome three challenges:
1. The company's stock price must rise significantly (for example, Zhongji Xuchuang's stock price had to rise from 35 yuan to 1280 yuan for employees to profit significantly).
2. The employee must remain in the company; leaving during the incentive period results in the forfeiture of shares (five employees at Zhongji Xuchuang lost their shares).
3. The company must meet its targets (such as revenue growth), and the employee must perform satisfactorily.
Example: An employee at REDnote was dismissed just before the expiration of her stock option period and had to fight for two years to receive only 660,000 yuan in compensation—missing even one of these requirements meant no compensation.
4. The Compensation Landscape in the Tech Industry Is Changing: Equity Has Become the Standard
Previously, engineers relied on salaries and year-end bonuses for income. Now, equity has become a crucial source of revenue:
- Nearly 450 A-share companies have implemented equity incentive programs this year (a 27% increase from the previous year).
- 73.6% of tech companies use equity incentives, far higher than the 58.8% average for the entire A-share market.
Trend: This is no longer a fringe practice among companies; it has become a new rule for retaining top talent in the tech industry. Simply offering higher salaries is no longer enough to attract and retain the best employees.
5. Hidden Pitfalls in Stock Options: Disputes and Risks Are Common
Stock options are not a guaranteed source of profit, and disputes are widespread:
- Co-founder of Yuejiang Technology filed a lawsuit claiming the company concealed equity-related issues due to the dilution of his options.
- The former CTO of Cambricon sued for 4.2 billion yuan in compensation for losses related to equity incentives.
- Many employees face issues such as diluted options, forfeited options upon leaving the company, and vague ownership conditions.
Conclusion: Stock options are like "roses with thorns"; they look attractive, but to reap the benefits, one must avoid these pitfalls.
In conclusion, the "era of wealth creation for engineers" in the tech industry has indeed arrived, but not everyone will be able to benefit from it. Choosing the right company, the right position, and enduring until the incentive period expires are essential to truly reap the rewards.