|Alphabet to Create New Equity Awards for ‘Other Bets’|
July 1, 2016 — 8:00 AM EDT
Google reorganized into Alphabet Inc. last year partly to give each new business, such as its fiber internet service or life sciences group, the independence to operate more like a startup. But there was an important part missing: how to incentivize executives and other employees with stock tied to their performance.
Alphabet is fixing this. Divisions within the company’s “Other Bets” group are creating new types of stock that will rise and fall in value depending on how each unit performs, according to people with knowledge of the plans. Executives of these young businesses are at different stages of implementing the compensation system, but in coming months, this new equity will be awarded to more employees as a big part of their pay, instead of the publicly traded Alphabet shares they currently get, the people said.
Verily, a health care business, is adopting the new approach, according to the people, who asked not to be identified discussing plans that haven’t been made public yet.
Executives at Other Bets companies have the option to not use the new stock system, said one of the people. Employees may also be given the choice to receive the new equity awards or stick with Alphabet stock grants, this person added.
Alphabet’s research lab, called X, already uses a system like this, another of the people said. Executives at Fiber, a fast internet service, decided not to use the compensation tool for now but haven’t ruled it out because it could help attract candidates from other parts of Alphabet, who may otherwise leave for jobs at startups promising equity riches, this person said. It’s not clear if Nest, another of Alphabet’s Other Bets, is doing it, another person said. An Alphabet spokeswoman declined to comment.