Airbnb’s announcement that chairman and CEO Brian Chesky had been awarded a $120 million pay package for the previous year drew attention, mainly when it was found that the number may have potentially included earning 12 million restricted stock units over the last decade.
The $120 million figure, they claim, was for accounting purposes. However, it is said that the fair value of those stock units was estimated to be at $430 million on the grant date of November 10, 2020; at that point, Airbnb’s share price was $35.81. That was a month before Airbnb’s IPO. By the year’s end of 2020, the stock was traded above $145. As a result, Chesky’s 10-year package could rise to $1 billion or more if the company’s share price hits specific projections every ten years and Chesky remains CEO.
In a proxy statement issued last month that included its executive pay figures, Airbnb noted that the value of Chesky’s eight remaining tranches of unearned shares at 2023’s end was $1.3 billion. That was the value at the end of 2023 of the remaining 9.6 million shares in the 12 million share package that was not already vested. These would be for the years between 2023 and 2030.
However, Chesky’s receipt of them is far from certain. Previous outcomes come two years after the vesting eligibility date. Tranche 1, invested in November 2021 with a stock-price hurdle of $125, was cleared by Airbnb, and Chesky received around $36 million in November 2023. That payment was based on the share price in November 2023.
With Tranche 2, Chesky earned this tranche in the later part of 2021, and the vested shares in November 2022 came with a hurdle of $165. Chesky won’t receive these shares until November 2024, but based on Tuesday’s closing share price of $156.66, that tranche would be worth roughly $188 million before taxes.
With Tranche 3, these were vested in November 2023 and included in the $1.3 billion fair value estimate. Their stock price was $205 per share in 2023, and Airbnb shares did not hit that mark.
As a result, the two tranches already earned could raise the $1.3 billion figure, but the unmet third tranche for 2023 could lower it.
This highlights the difficulty of estimating the payout since it is based on whether Airbnb’s share price reaches the designated threshold and the actual share price on the date an earned award settles.
Even if Airbnb does not hit the stock price hurdles over the next seven years, Chesky still owns many shares. He directly owned more than 14.3 Class A Airbnb shares and another 187,000 indirectly through trusts. Based on Tuesday’s closing price of $156.66, those holdings could be worth almost $2.3 billion.
The Airbnb CEO’s base salary in 2023 was $1, and the company paid $295,124 for his security costs, which it labeled “all other compensation.” The median employee pay last year at Airbnb was $243,757.
