- Palantir cofounder and CEO Alex Karp hasn’t acquired inventory from the corporate because it went public, however his present holdings have ballooned lately, making him one of many best-paid CEOs within the nation, in keeping with a brand new calculation dubbed “compensation actually paid.”
Buyers awaiting earnings from protection contractor Palantir on Monday have already had a banner 12 months, with the know-how firm seeing its inventory soar. However few made out higher than cofounder and CEO Alex Karp, who noticed a multibillion-dollar bounce in his web price final 12 months on the power of his Palantir shares, which elevated 340% in 2024.
Karp, who’s been with the corporate since he cofounded it, grew to become $6.8 billion richer on paper, in keeping with Palantir’s proxy submitting.
That greenback determine seems in a column titled “Compensation Actually Paid to CEO,” which, Palantir says in a footnote, “does not represent compensation actually paid, earned or received by him during the applicable year.”
As an alternative, it represents the huge enhance within the worth of inventory grants and inventory choices that Karp presently holds.
The compensation below the “actually paid” calculation dwarfs the $4.6 million Karp acquired final 12 months below a extra normal accounting of CEO pay.
Utilizing these guidelines, the $4.6 million got here from $1.1 million in money with the remainder representing the worth of safety and journey advantages.
For the reason that “compensation actually paid” column began showing on SEC filings two years in the past, it has created a brand new class of ultra-billionaires, the New York Occasions famous final 12 months, when Karp was second on the record of best-paid CEOs by the newer metric.
“Yes, it’s real money, but it’s not liquid cash immediately,” mentioned Rohan Williamson, professor of finance at Georgetown College’s McDonough College of Enterprise.
“It’s not like he went home and they said, here is the check for $6.8 billion. But that’s what the value is,” he mentioned.
A ten-year wait
As is pretty typical for a tech founder, Karp receives the majority of his compensation in inventory. Palantir went public in 2020 with Karp holding 141 million inventory choices and 39,000 restricted inventory items, which had been valued at $1.1 billion on the time. Notably, Karp has acquired no new grants or inventory choices since.
“Effectively, the huge pay package this person received—and it’s a very big one—is in 2020,” mentioned Egor Matveyev, senior lecturer in finance at MIT Sloan College of Administration. “They were designed as very long-term stock awards with a very long-term vesting period… everything he’s realizing goes back to that original grant.”
In an uncommon twist, Karp had a really lengthy vesting interval—it will be 10 years earlier than he would take pleasure in full possession of his shares. A extra typical schedule for performance-based inventory awards is three years, in keeping with Eric Hoffmann, vice chairman and chief knowledge officer at Farient Advisors.
“They’ve basically trying to keep him there in place until he’s approaching retirement age,” Hoffmann instructed Fortune.
Pay now, pay later
On the time it was given, Karp’s award was fairly beneficiant. “I would say this is on the higher end, when it comes to a company of this size,” Matveyev mentioned, noting the median CEO makes $20 million a 12 months; Karp’s $1.1 billion over a decade works out to over $100 million yearly.
However since then, Palantir’s inventory worth has elevated by an element of 12—and so has the worth of Karp’s holdings. That reveals a possible draw back of “moonshot” compensation packages..
“If the company is doing really well, the realized value can be enormous,” Matveyev mentioned. “We’re just giving away a lot of value.”
A Palantir spokesperson didn’t instantly reply to a request for remark.
A number of comp professionals in contrast Karp’s ballooning compensation to Elon Musk’s take care of Tesla, which at one level was valued at $56 billion and hinged on his assembly sure benchmarks. (To this point, the pay deal has been rejected twice by the Delaware Court docket of Chancery.)
“In the broader company space [this pay structure] is unusual; in the tech space, it’s not,” mentioned Georgetown’s Williamson. “The view is, ‘I took a lot of risk, I bought the shares early, I did all the work, it’s built on my brain, it turned a profit very quickly, I deserve it. And that’s debatable, but that’s the structure.”
This story was initially featured on Fortune.com
