To prevent competitors from poaching talent… OpenAI's radical move 'Stock options immediately upon hire'

Elimination of 'vesting cliff' for new hires

Stock option restrictions were in place to encourage retention

Policy changed amid hiring offensives from Meta and others

$6 billion in stock compensation expected this year alone

xAI also shortens vesting cliff period

OpenAI has eliminated the "vesting cliff," a restriction on stock compensation that had applied to new hires. The practice of requiring a waiting period after joining before employees could exercise stock options has been removed, and the company will grant stock compensation rights immediately upon hire. The move is seen as a gambit to gain an advantage in the intensifying competition to recruit talent in the artificial intelligence (AI) field.

On the 13th (local time), The Wall Street Journal (WSJ) reported that OpenAI informed employees of this change in compensation policy last week. A vesting cliff refers to the minimum period an employee must remain employed to exercise stock options or stock-based compensation. Typically, Silicon Valley tech companies set a one-year vesting cliff to prevent early departures by new hires and to encourage long-term tenure.

Earlier in April, OpenAI sharply shortened this period from the industry standard of one year to six months. This time, it went a step further and removed the restriction period altogether. P.J. Simo, OpenAI's head of applications (CEO), explained the move as "a measure to encourage new hires to take bold risks without fear of being fired before their first stock allocation."

Industry observers view the decision as evidence that the AI talent war is devolving into a money game. Competitors such as Google, Meta, and Anthropic have been mounting offensives, offering more than $100 million (about 143 billion won) in compensation packages to recruit top-tier researchers. OpenAI is expected to spend $6 billion this year on stock compensation alone, nearly half of its revenue.

xAI, the competitor led by Tesla CEO Elon Musk, also cut its vesting cliff in half this summer as part of its hiring push. xAI has faced hiring difficulties due to Musk's intense work demands, frequent executive firings, and recent ethical controversies surrounding its chatbot. Citing sources, the WSJ reported that "xAI, which struggled to recruit talent because of Musk's 24-hour work philosophy and political activities, has seen higher acceptance rates of job offers after shortening the vesting period."

Zahir Mohiuddin, co-founder of the tech industry salary data platform levels.fyi, said, "Companies that need to be competitive are breaking the traditional 'one-year vesting' practice," calling it "a drastic measure by companies trying not to lose talent."

Silicon Valley = Correspondent In-Yeop Kim inside@hankyung.com