Homegrown e-commerce giant Flipkart has changed the variable pay structure for its mid- to senior-level executives, substituting it with stock options, according to a report.
As per the new plan, the cash component of the variable pay has been cut by 40% and will be substituted with stock options, Mint reported on Monday, citing company officials. These stock options will be offered over and above employee stock ownership plans (ESOPs).
This means that the executives' pay will now be affected by Flipkart's valuation and market performance, the report said.
Flipkart introduced the move to reduce its spending on salaries, which constitutes one of the largest expenses at the firm. The compensation structure for Flipkart's managers comprises fixed pay, variable pay and stock options.
In August, Flipkart restructured the management team. Former Tiger Global executive Kalyan Krishnamurthy was appointed to lead the main marketplace, retail and advertising businesses, while Saikiran Krishnamurthy was made the head of Ekart, the logistics business of Flipkart. Nitin Seth, who was Flipkart's chief people officer, was redesignated as chief administrative officer while former head of advertising Ravi Garikipati was named to lead the engineering division. With Binny Bansal as CEO and the new leadership structure in place, the company aims to shift back to the inventory-based model instead of operating on the marketplace model it pivoted to last year.
Flipkart is locked in an intense battle with Amazon and Snapdeal to capture market share. All three have launched various initiatives to gear up for the upcoming festive season sales. Recently, Flipkart said it has registered over 100 million users on its platform, a first for an e-commerce firm in the country.
Just ahead of its Big Billion Day sale, Flipkart has partnered with Apple to sell the iPhone 7, from where it will directly source the smartphones.
Amazon has been gearing up for the Diwali sales for several months by increasing its operational capacity by opening 24 new fulfilment centres. It has also seen its seller base increase from 40,000 last December to 120,000 this month. Its offline shopping initiative Udaan has expanded to 100 cities and towns in 14 states from just three states last year.
Snapdeal, on the other hand, launched a new wholesale unit, E-Agility Solutions, that will bring on board fashion brands that sell directly to customers. The move was made in order to tap the fashion vertical which constitutes 20-30% of Snapdeal's business.
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