Meta (NASDAQ:META), the parent company of Facebook, Instagram, WhatsApp, and Oculus, has announced substantial changes to its executive compensation structure. The company has decided to raise the target bonus percentage for executives, excluding CEO Mark Zuckerberg, from 75% to 200% of their base salaries. This decision comes alongside recent workforce reductions, signaling a shift in Meta’s financial strategy. Additionally, Meta has been expanding its investments in artificial intelligence, aiming to advance its AI assistant and research initiatives.
Previously, Meta’s executive compensation package was positioned at or below the 15th percentile compared to peer companies. The latest adjustment moves their total cash compensation to approximately the 50th percentile. The company has been restructuring its workforce, announcing a reduction of 5% of employees based on performance evaluations. This strategy reflects the ongoing restructuring within the company as it aims to balance cost management with competitive executive pay.
Why did Meta increase executive bonuses?
Meta explained that the decision to raise executive bonuses was based on comparisons with similar roles at peer companies. The company stated that prior to this increase, its executives were compensated at significantly lower levels than counterparts at competing firms.
“In approving this increase, the CNGC considered that the target total cash compensation for the named executive officers (other than the CEO) was at or below the 15th percentile of the target total cash compensation of executives holding similar positions,” Meta said.
Following this adjustment, the total cash compensation for these executives now aligns with the median of its industry peer group. This move is intended to retain top leadership while maintaining financial stability.
How does this decision affect Meta employees?
At the same time, Meta is implementing a workforce reduction strategy, marking a continuation of its cost-cutting measures. The company aims to reach 10% non-regrettable attrition by the end of the current performance cycle, which includes about 5% of job cuts in 2024.
“We typically manage out people who aren’t meeting expectations over the course of a year, but now we’re going to do more extensive performance-based cuts during the year,” Zuckerberg stated.
By focusing on performance-based layoffs, Meta is intensifying its evaluation process to eliminate underperforming employees more frequently. These measures reflect a broader trend among tech companies prioritizing efficiency and profitability.
Meta’s financial decisions also coincide with its increasing focus on artificial intelligence. The company plans to invest up to $65 billion in AI initiatives, including the development of Meta AI and the Llama 4 model. Zuckerberg has emphasized the importance of AI in shaping Meta’s future and predicts that 2025 will be a crucial year for advancements in this area.
“Meta AI will be the leading assistant serving more than 1 billion people, Llama 4 will become the leading state of the art model, and we’ll build an AI engineer that will start contributing increasing amounts of code to our R&D efforts,” Zuckerberg wrote.
As Meta refines its financial and strategic focus, the company aligns its executive compensation with industry standards while tightening its workforce through performance-based layoffs. These moves highlight the company’s ongoing efforts to retain top talent, enhance operational efficiency, and push forward in AI development. However, balancing executive pay increases alongside job reductions may raise concerns among employees and investors. The effectiveness of these decisions will likely depend on how well Meta executes its long-term business objectives.
