US IT Company Founders No Longer Take 'Zero Salary'... Now Receiving Massive Compensation Directly

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] Startup founders in Silicon Valley, located in the western United States, are now directly receiving enormous compensation through stock grants, unlike in the past.

Until now, many founders of major U.S. big tech companies earned little to no salary and amassed vast wealth solely through the appreciation of their company shares, but this practice is gradually disappearing.

According to the Wall Street Journal (WSJ) on the 18th (local time), Alex Karp, founder and CEO of big data analytics company Palantir, received a total compensation of $1.1 billion (approximately 1.3044 trillion KRW) last year.

MyLogiq, a listed company information analysis firm, reported that among the top 10 U.S. publicly traded companies with the highest CEO compensation last year, seven were startups that went public in the same year, including Palantir.

WSJ explained that because large tech companies rose under the leadership of their founders, investors have created a favorable environment for founders.

Investors not only provide founders with substantial compensation such as stock grants but also grant dual-class voting rights, allowing them to secure management control with a small equity stake.

In particular, CEO compensation at newly listed startups with dual-class voting structures has surged recently.

According to WSJ’s analysis of corporate disclosure data and research by Professor Jay Ritter of the University of Florida, the median CEO compensation for dual-class voting companies that went public last year was $21.9 million (approximately 25.97 billion KRW), more than six times the previous year’s $3.3 million.

Supporters of this compensation system argue that founder compensation is linked to company growth metrics, motivating founders to sustain rapid company growth.

However, WSJ also reported opposing views that granting additional stock compensation to founders who already hold substantial equity is unnecessary and dilutes shareholder value.

This differs from the traditional Silicon Valley practice. Founders and CEOs of established big tech companies have received salaries in cash or stock gradually over several years.

For example, Jeff Bezos, founder of Amazon, earned an annual cash salary of only $82,000 during his tenure as CEO, and his total compensation did not exceed $2 million.

Moreover, Amazon’s public filings for years stated that "Bezos requested no additional compensation due to his significant company equity."

Mark Zuckerberg of Facebook currently has a $1 annual salary and receives no stock grants. Jack Dorsey, founder of Twitter and Square, also earns less than $5 in salary from both companies and receives no stock grants.