In this photo illustration the Peloton Interactive logo seen displayed on a smartphone screen.
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Peloton has sweetened incentives for its workers with one-time cash bonuses and changes to its stock compensation plan as it fights to retain employees and fix its struggling business, according to internal memos viewed by CNBC.
The changes come just over five months since Barry McCarthy, a former Spotify and Netflix executive, struggled to boost Peloton’s morale as part of a turnaround. 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 spike.
At the time of the C-suite redesign, Peloton announced that it was cutting approximately $800 million in annual costs. This included the loss of 2,800 jobs, or about 20% of positions in the company. Now investors are waiting to see if McCarthy can boost sales and win customers as soaring inflation squeezes budgets and a competitive job market makes it harder for companies to retain employees.
Shares of Peloton hit an all-time low of $8.73 on Tuesday, down more than 70% since the start of the year, amid a broader market sell-off. The stock had traded at $129.70 almost exactly a year ago.
Shari Eaton, Peloton’s chief human resources officer, said in an interview Wednesday that the company is taking steps to ensure employees can benefit while the company works through its turnaround efforts.
“The extraordinary circumstances we now find ourselves in really give us the opportunity to pause and see what we can do to ensure our future success,” Eaton said.
In one of the internal memos, Peloton told employees that eligible team members would have their post-IPO options repriced to Peloton’s July 1 closing price of $9.13.
As an example, Pelton said the options granted on March 1 had an exercise price of $27.62, meaning they were “underwater,” and employees did not benefit. financially as long as the action had not exceeded this threshold. After the price review, Peloton employees will be able to exercise their options after the price rises above $9.13.
Peloton said it has no plans for future repricing events.
The company is also accelerating the one-year vesting requirement for qualifying unvested restricted stock units that have more than eight vesting dates remaining in their vesting schedule. This gives employees earlier access to the value of stock units, Eaton said.
The change does not apply to hourly employees or C-suite executives, the company noted.
Not all Peloton employees own or want shares in the company. Instead of a stock subsidy, Peloton’s hourly workers in September will be eligible for a one-time cash bonus to be paid by the end of February, according to one of Peloton’s internal memos.
Many of the company’s hourly employees said they would rather receive cash compensation than longer-term stock grants, Eaton said in a phone interview.
Peloton said people who are employed on an hourly basis from July 1 will be eligible for the one-time bonus as long as they remain with the company until January 23. The amount of the bonus will vary for people in the business, Eaton said. Share awards granted in the past will not be affected.
Peloton also told employees Wednesday that it had recently completed its first pay equity study with Aon, a third-party consulting firm.
The company said it identified less than 4% of its workforce, or 206 people, with a base salary disparity to their peers that could not be explained by factors such as job level, geography or seniority. Peloton said it took immediate action to eliminate the disparities.