In this image illustration the Peloton Interactive logo is seen displayed on a smartphone screen.
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Peloton has sweetened incentives for its employees with one-time cash bonuses and changes to its stock compensation plan as it struggles to retain employees and repair its ailing business, according to internal memos from CNBC.
The changes come just over five months since Barry McCarthy, a former Spotify and Netflix executive, has been working to boost morale at Peloton as part of a turnaround push. McCarthy was named CEO in early February, replacing founder John Foley as the company’s spending spiraled out of control and demand for its bikes waned after a pandemic peak.
At the time of the C-suite restructuring, Peloton announced it would reduce annual costs by approximately $800 million. This included cutting 2,800 jobs, or about 20% of the company’s jobs. Now investors are waiting to see if McCarthy can grow sales and win customers as rising inflation squeezes budgets and a competitive job market makes it harder for companies to retain employees.
Peloton shares hit an all-time low of $8.73 on Tuesday, down more than 70% year-to-date amid a broader market sell-off. The stock was trading at $129.70 almost exactly a year ago.
Peloton chief people officer Shari Eaton said in an interview Wednesday that the company is taking the actions to allow employees to benefit while the company works on its turnaround efforts.
“The extraordinary circumstances we find ourselves in now really give us an opportunity to stop and consider what we can do to ensure future success,” said Eaton.
In one of the internal memos, Peloton informed employees that eligible team members will price their post-IPO options at Peloton’s July 1 closing price of $9.13.
As an example, Pelton said the options granted on March 1 had a strike price of $27.62, meaning they were “under water” and employees didn’t benefit financially until the stock crossed that threshold. After the price adjustment, Peloton employees can exercise their options after the price surpassed $9.13.
Peloton said it has no plans for future price adjustments.
The Company is also accelerating the vesting requirement by one year for eligible non-vesting restricted stock units that have more than eight vesting dates in their vesting schedule. This allows employees to access the value of the stock units sooner, Eaton said.
The change doesn’t apply to hourly workers or C-suite executives, the company noted.
Not every Peloton employee owns or wants stock in the company. In lieu of an equity grant, Peloton hourly workers will be eligible for a one-time cash bonus in September that must be paid before the end of February, according to one of Peloton’s internal memos.
Many of the company’s hourly workers said they would prefer cash compensation to longer-term stock awards, Eaton said in a phone interview.
Peloton said people employed on an hourly basis starting July 1 are eligible for the one-time bonus as long as they stay with the company through January 23. The amount of the bonus varies for people across the company, Eaton said. Equity Awards granted in the past will remain unaffected.
Peloton also told its employees Wednesday that it recently conducted its first equal pay study with Aon, an independent consulting firm.
The company said it found less than 4% of its workforce, or 206 people, had a base pay differential compared to peers that could not be explained by factors such as job level, geography or seniority. Peloton said it took immediate action to resolve the differences.