Kioxia’s stock option plan value per participating employee is WILD thanks to the AI boom.
There has been a lot of news flow around memory makers SK Hynix and Samsung paying ~US$400k bonuses to each employee, but Kioxia’s potential ESOP windfall could dwarf those amounts for participating employees.
Kioxia was bought by Bain Capital, which instituted an ESOP. The NAND memory maker’s share price is up almost 40-fold since IPO 18 months ago on the AI-driven boom in demand.
Thanks to the ESOP, the top few layers of people at Kioxia may now be US$ millionaires. Many will almost certainly be multi-millionaires. Many of these people would likely never have earned over $100k in a year previously – at least prior to the current AI boom.
It is difficult to find accurate data around the number of participants in the ESOP. We have heard rumours of 1,000 or fewer people of the 15,218 employees. Even if every employee participated (which is very unlikely), the average paper profit on the options granted is $310,494 per employee.
If, say, 1,000 people were in the plan, the average profit per employee is almost $5 million!
The plan is almost certain to be top heavy – greater potential rewards to those with the most ability to impact the outcome is the private equity way.
Needless to say, Kioxia’s executive pool are now, on paper, rich beyond their wildest dreams.
This type of windfall could, and should, spark a discussion about the use of stock incentives in Japan. It is still uncommon amongst smaller companies for there to be any equity-based compensation.
With governance reforms and activist pressure spreading across the market, managers and other employees may start asking the questions:
- Why should only shareholders benefit from our improved capital allocation and operations –
- Why not employees too?
- Why should private equity-owned companies provide generous stock participation to employees, but not publicly listed companies?
Asking such questions could lead to major change across Japan’s equity market. We will certainly be bringing this up in our engagements with management teams.
