OpenAI is paying $1.5 million per employee in equity
Average employee stock awards dwarf pre-IPO payouts at Google and Facebook as costs surge.
OpenAI’s roughly 4,000 employees received stock options worth an average of $1.5 million per employee, more than at any other startup in history, according to data from Equilar published by The Wall Street Journal.
The options granted to employees at the artificial intelligence company are seven times higher than those awarded to Google employees ahead of its 2004 IPO, and 18 times higher than the average for other large technology companies in the year preceding their IPOs, after adjusting for inflation. The analysis covers companies that have gone public over the past 25 years.
OpenAI’s spending on salaries and employee benefits is expected to reach 46% of revenue this year. By comparison, in the year before their IPOs, those costs accounted for 15% of revenue at Google, 6% at Facebook, and 6% on average among the 18 companies examined.
The extraordinary compensation awarded to OpenAI employees reflects an intense industry-wide battle to recruit and retain top AI researchers and engineers, as companies race to gain an edge in developing the next generation of advanced models. Competitive pressure escalated last summer, when Meta launched a major push to strengthen its AI capabilities, recruiting senior talent from OpenAI, Apple, and others with exceptionally large pay packages. According to reports, Meta offered salary and stock packages worth hundreds of millions of dollars, and in some cases as much as $1 billion.
OpenAI employees’ generous stock options come on top of high base salaries and substantial bonuses. In September, The Wall Street Journal reported that a month earlier the company had granted one-time bonuses to members of its research and engineering teams that, in some cases, totaled several million dollars per employee.
These compensation costs are having a significant impact on OpenAI’s financial performance, contributing to a rapidly expanding operating loss and substantial dilution of existing shareholders. They also add to the company’s massive capital expenditures, estimated at tens of billions of dollars, to build AI data centers, raising questions about the long-term sustainability of OpenAI’s business model and fueling concerns about a potential bubble in the AI sector.
Those pressures are expected to intensify. According to The Wall Street Journal, OpenAI told investors last summer that its stock-based compensation expenses are projected to increase by $3 billion by 2030. About two weeks ago, the company also informed employees that it was eliminating a policy requiring them to remain at OpenAI for six months before exercising their stock options, a move that could further increase employee compensation costs.
