As LinkedIn has grown to become one of the world’s largest professional networking platforms, with over 800 million members worldwide, many employees and prospective hires wonder if they can get stock options or equity compensation as part of their employee benefits package.
LinkedIn is owned by Microsoft, which purchased the company for $26.2 billion in 2016. As a public company before it was acquired, LinkedIn did provide stock options and equity compensation to employees. Now as part of Microsoft, current and future employees are still eligible for stock awards and equity compensation.
LinkedIn’s Growth and Business Model
LinkedIn was founded in 2003 and experienced tremendous growth as a professional social networking site. By 2011, LinkedIn went public and was trading on the NYSE with a market capitalization of over $8 billion. At the time of its IPO in 2011, LinkedIn had over 100 million members.
LinkedIn’s business model focuses on sales to enterprises and recruitment solutions. Premium subscriptions allow members enhanced profiles and better networking capabilities. Recruitment services connect HR professionals with qualified candidates through innovative matching algorithms and big data analytics.
This successful business model led to rapid growth. When Microsoft acquired LinkedIn for $26.2 billion in 2016, the professional networking platform had over 400 million members.
Transition to Microsoft Ownership
By acquiring LinkedIn in 2016, Microsoft gained ownership of the world’s largest professional network to incorporate into its product line. LinkedIn still operates somewhat independently under Microsoft’s ownership, but Microsoft now determines employee compensation and benefits programs.
Microsoft retained LinkedIn’s senior management team and staff as part of the acquisition. Many LinkedIn employees had stock options that vested as part of the buyout.
While no longer a publicly traded company, LinkedIn continues to grant stock awards and equity compensation to employees as part of Microsoft’s overall compensation program.
Eligibility for Stock Options and Equity Compensation at LinkedIn
Under Microsoft’s ownership, LinkedIn employees are eligible for stock awards through Microsoft’s employee stock purchase plan. Employees can purchase Microsoft stock at a discounted rate through scheduled payroll deductions. This gives employees at LinkedIn an affordable way to benefit through stock ownership in Microsoft.
LinkedIn employees may also receive stock options and restricted stock unit awards based on their position, performance and tenure at the company. This gives employees the opportunity to share in the growth and success of Microsoft overall.
The eligibility criteria for stock-based compensation for LinkedIn employees include:
- Being a regular full-time or part-time employee at LinkedIn
- Meeting high performance standards and career growth potential
- Having a certain tenure or seniority level at the company
While not guaranteed, stock options and equity awards are commonly part of the total rewards package for many roles at LinkedIn. This gives employees an ownership stake in Microsoft and provides funding for sharing the success of the business.
Types of Stock-Based Compensation Offered
As part of Microsoft, LinkedIn employees have access to a range of stock-based compensation plan types:
Employee Stock Purchase Plan
Microsoft’s Employee Stock Purchase Plan allows employees to purchase Microsoft stock through payroll deductions at a 15% discount to the market price. Employees can contribute 1-15% of their eligible pay each pay period to purchase Microsoft stock on a quarterly basis.
Stock Options
Stock options give employees the right to purchase shares of Microsoft stock at a set price (the grant price) over a period of time. If the market value of Microsoft stock rises above the grant price, employees can exercise the options to buy shares at below market value.
Restricted Stock Units (RSUs)
RSUs are shares of Microsoft stock that are awarded to employees. The stock is restricted for a set vesting period, at the end of which employees take full ownership of the shares and can sell them at the market price.
Performance Stock Units (PSUs)
PSUs are shares that vest and are distributed based on meeting certain performance metrics or goals. This provides incentive for employees to meet business objectives that trigger the award of the stock units.
Value of Stock Compensation for LinkedIn Employees
Here is an overview of the potential value of stock-based compensation for eligible LinkedIn employees:
Gain Value through Microsoft’s Stock Growth
Microsoft’s stock value has grown substantially over the past decade. The share price has risen from around $30 in 2013 to over $240 today in 2023. By granting stock-based compensation, LinkedIn employees share in those gains.
Receive Potentially Lucrative Awards
Stock option, RSU and PSU grants given to LinkedIn employees could be worth tens of thousands or even hundreds of thousands of dollars depending on seniority level and size of the award.
Benefit from Long-Term Incentives
Stock-based compensation encourages a long-term mindset and incentives for employees to contribute to Microsoft’s sustained growth over decades of employment.
Share in Financial Success
Microsoft’s profitability delivers value to shareholders. Stock-based compensation allows LinkedIn employees to share in that financial success.
Factors That Determine Stock-Based Compensation
While not all LinkedIn employees will receive stock awards, those who do qualify can receive significant value. Here are some of the key factors that determine the level of stock-based compensation:
- Employee performance – Exceptional performers receive higher awards.
- Job level – More senior positions are eligible for larger stock grants.
- Division within LinkedIn – Different business units may offer different award opportunities.
- Tenure at the company – Longer-serving employees may qualify for larger grants.
By linking stock-based compensation to these types of factors, Microsoft rewards and retains top talent within LinkedIn through lucrative long-term incentives.
Vesting Schedules for Stock-Based Awards
To receive the full value of stock options, RSUs or other stock awards, LinkedIn employees must vest in the grants over time. Typical vesting schedules include:
- 4-year vesting – The award fully vests in equal portions annually over 4 years.
- 5-year vesting – 20% vests each year for 5 years.
- Cliff vesting – The entire award vests after a set time, such as 1 year.
Vesting keeps employees invested in the company for the long-term. Microsoft’s use of multi-year vesting and continued eligibility for stock awards encourages retention of top talent at LinkedIn.
Taxation of Stock-Based Compensation
LinkedIn employees who receive stock-based compensation will owe taxes on the value of the shares received when the awards vest. The tax liability depends on the type of award:
Non-qualified stock options
Taxed as ordinary income when the options are exercised based on the difference between the grant price and market price at exercise. Subject to federal, state and FICA tax withholding.
Incentive stock options
No tax at exercise. Taxed as capital gains when the shares are sold. Must meet holding period rules to receive preferential tax treatment.
RSUs and PSUs
Taxed as ordinary income when shares are distributed. Subject to standard payroll tax withholding.
Key Takeaways on LinkedIn Employee Stock Compensation
Here are some of the key points on stock-based compensation eligibility for LinkedIn employees:
- LinkedIn is owned by Microsoft, so stock grants are in Microsoft shares
- Many employees can qualify for stock options, RSUs, PSUs based on performance
- Participation in the employee stock purchase plan is also available
- Stock awards help retain and reward top talent
- Grants can be highly valuable depending on size and stock growth
- Tax rules apply when stock compensation vests
While no longer publicly traded, LinkedIn employees can still benefit from stock-based compensation as part of Microsoft’s total rewards system. For high performers at eligible levels, stock options and equity awards can greatly increase compensation.
Conclusion
In summary, while LinkedIn is now owned by Microsoft, employees can still receive meaningful stock-based compensation. Eligible employees have access to Microsoft’s employee stock purchase plan, stock options, restricted stock units and performance stock units. These awards encourage retention, reward performance and give employees ownership in Microsoft’s success. The value of stock compensation can be significant for many roles at LinkedIn, providing lucrative long-term incentives for current employees and a compelling benefit for prospective talent.