News: Employees can exchange their stock for cash or shares of Alphabet.
Alphabet is set to roll out a new compensation system for its employees working in its ‘Other bets’ groups.
The new system will award shares of respective companies to the employees and the valuation of the companies will be assessed every six months, Bloomberg reported quoting people familiar with the plans.
The stock held by those employees will be exchanged for cash or shares of Alphabet.
Last year, Google was reorganised into Alphabet to allow its businesses to operate independently with increased focus. But a system to offer incentives for the performance of employees in each unit was not outlined.
Alphabet plans to resolve the issue by creating a new form of shares whose value will depend on the respective unit’s performance. The stocks will be allotted to firms under its Other Bets group.
Verily, a health care business of Alphabet, is implementing the new system, according to the sources.
However, staff of Other Bets’ companies will have the choice to opt out of the new stock awards.
A source told the publication that Alphabet’s research lab, known as X, has already put in place a system similar to the new approach being planned.
The stock award system is designed to assist Larry Page, Alphabet’s chief executive officer and a Google founder, in making Other Bets companies operate "like fast-moving, lean startups and less like research divisions."
Currently, employees in most of the Other Bets’ firms receive stocks of the holding company, which implies that the performance of their equity compensation is linked to Google digital advertising business.
But, under the new incentive system, the stock compensation will be tied to respective company’s performance.
Verily plans to give stock to its employees based on an independent, fair market valuation of the business given by a third party firm.
Employees will have an option to sell a part or whole of their shares allotted to them every six months to Alphabet. The holding company will buy the stock from them either in cash or by allotting its shares.
The new system will also allow Verily employees who plan to leave the company to change their stock into cash or Alphabet shares by taking into account the last valuation of the company.