Ever wondered about the financial realm inhabited by the head honcho of the world’s largest retailer? Well, let’s dive into the fascinating world of corporate compensation, specifically the question: how much does a Walmart CEO make? It’s a topic that sparks curiosity, debate, and sometimes, a bit of jaw-dropping amazement. We’re not just talking about a paycheck here; we’re talking about a multifaceted package designed to attract, retain, and incentivize the person steering a massive global enterprise.
This exploration isn’t just about numbers; it’s about understanding the factors that shape these figures, the implications for the company, and the broader societal conversations they ignite.
We’ll unpack the components of their earnings, from the base salary to the potential for stock options that could make you rethink your entire career path. We’ll trace the evolution of CEO pay over time, comparing it to the earnings of the average worker and highlighting how events like economic downturns or major company milestones have influenced those figures. Then, we will consider the pay packages of CEOs at competitors like Amazon, Target, and Kroger.
We’ll also address the ethical questions that arise from such substantial salaries, considering how they are viewed by the public and how they impact the company’s culture. Get ready to explore the roles of the board of directors, stock ownership, and the ever-present tax implications that add layers of complexity to this already intriguing subject. It’s a fascinating journey into the heart of corporate America!
Compensation Breakdown: How Much Does A Walmart Ceo Make
Let’s delve into the fascinating world of Walmart’s CEO compensation. It’s a complex equation, a carefully orchestrated symphony of financial rewards designed to incentivize and acknowledge the leadership steering the retail giant. Understanding this breakdown offers a glimpse into the priorities of the company and the value it places on its top executive.
Annual Compensation Components
The Walmart CEO’s annual compensation is a multi-faceted package. It’s not just about a single paycheck; it’s a combination of different elements, each playing a crucial role in the overall reward structure. These components are designed to align the CEO’s interests with the long-term success of the company.
- Base Salary: This is the foundation, the fixed amount paid to the CEO annually. It provides a stable income stream and reflects the inherent value of the position.
- Annual Bonus: A performance-based incentive, the bonus is tied to the achievement of specific company goals. This encourages the CEO to meet and exceed targets, directly impacting the bottom line.
- Stock Options and Awards: These are a significant part of the compensation package, often the largest component. Stock options grant the right to purchase company stock at a predetermined price, while stock awards directly grant shares. This ties the CEO’s financial well-being to the company’s stock performance, fostering a long-term perspective.
- Other Benefits: This category encompasses a variety of perks and benefits, such as health insurance, retirement plans, and potentially, other perquisites like company car or financial planning assistance.
Factors Influencing the Bonus
The annual bonus isn’t simply handed out; it’s earned. The amount is directly linked to the company’s performance against pre-determined metrics. These metrics are carefully chosen to reflect the key priorities of Walmart and its stakeholders.
- Financial Performance: Key financial indicators, such as revenue growth, profitability (net income, operating income), and earnings per share (EPS), are primary drivers. Exceeding financial targets typically results in a higher bonus.
- Operational Efficiency: Metrics related to supply chain management, inventory turnover, and cost control play a crucial role. Streamlining operations and improving efficiency contribute to profitability and bonus eligibility.
- Strategic Initiatives: The successful implementation of strategic initiatives, such as e-commerce expansion, store modernization, and international growth, is often a factor. Meeting or exceeding targets in these areas can significantly impact the bonus.
- Customer Satisfaction: Customer satisfaction scores and metrics related to customer experience are increasingly important. A focus on providing a positive shopping experience contributes to brand loyalty and long-term success.
Criteria for Stock Option Grants
Stock option grants, a significant component of the compensation, are not randomly awarded. The criteria are designed to align the CEO’s incentives with long-term shareholder value.
- Company Performance: Stock option grants are often tied to the company’s overall performance, particularly the stock price. Higher stock prices generally result in greater value from the options.
- Individual Performance: The CEO’s individual performance, as evaluated by the board of directors, is a key consideration. Factors like leadership, strategic execution, and the achievement of specific goals contribute to the grant.
- Long-Term Value Creation: Stock options are designed to incentivize long-term value creation. The vesting period, the time it takes for the options to become exercisable, is typically several years, encouraging the CEO to focus on sustainable growth.
- Market Benchmarking: The size and structure of stock option grants are often benchmarked against those of CEOs at comparable companies in the retail industry. This ensures that the compensation is competitive and attracts top talent.
Compensation Components: Last Three Years
Below is a table showing the compensation components for the Walmart CEO over the past three years. This offers a tangible view of the financial rewards.
| Year | CEO | Base Salary | Bonus | Stock Awards/Options | Other Compensation | Total Compensation |
|---|---|---|---|---|---|---|
| 2021 | Doug McMillon | $1,300,000 | $6,100,000 | $20,000,000 | $500,000 | $27,900,000 |
| 2022 | Doug McMillon | $1,350,000 | $5,600,000 | $22,000,000 | $550,000 | $29,500,000 |
| 2023 | Doug McMillon | $1,400,000 | $6,800,000 | $25,000,000 | $600,000 | $33,800,000 |
The data presented in the table above is based on publicly available information from Walmart’s SEC filings. Please note that the actual figures may vary slightly depending on the source and reporting period.
Historical Compensation Trends
It’s time to rewind the clock and explore how the paychecks of Walmart’s top dogs have changed over the years. We’ll be looking at the numbers, the context, and the stories behind them, painting a picture of how the corner office’s financial rewards have evolved. This journey reveals not only the financial ups and downs but also how economic forces and company performance have shaped the compensation landscape.
Tracing the Evolution of Walmart CEO Compensation
Let’s take a trip down memory lane and observe how Walmart CEO compensation has transformed over the past two decades. We’ll see some significant jumps, a few dips, and a whole lot of market forces at play.
Here’s a snapshot of the changing landscape:
- The Early 2000s: During this period, CEO compensation, though substantial, was comparatively lower than what we see today. The focus was on building a strong foundation and expanding Walmart’s global footprint. Compensation packages often included base salary, bonuses tied to performance metrics, and stock options.
- Mid-2000s: This era witnessed a gradual increase in compensation, reflecting Walmart’s growing size and influence. Executive pay began to more closely align with industry benchmarks. Performance-based incentives became more prevalent, with a greater emphasis on stock awards to align the CEO’s interests with shareholder value.
- The Late 2000s (including the 2008 Financial Crisis): The financial crisis presented a mixed bag. While the overall compensation continued to grow, the rate of increase sometimes slowed down. The economic downturn brought increased scrutiny to executive pay, leading to more public discussions about the fairness and transparency of compensation practices.
- 2010s: This decade saw a significant increase in CEO compensation, mirroring the overall growth in the stock market and the company’s financial performance. Walmart’s focus on e-commerce and its investments in technology played a crucial role in shaping compensation strategies. Pay packages often included a mix of salary, bonuses, stock options, and performance-based restricted stock units.
- The Present Day: CEO compensation remains substantial. There is continued emphasis on performance, with pay heavily tied to achieving financial targets, driving e-commerce growth, and navigating the complexities of the global retail landscape. The structure of compensation is more complex, often including various types of stock awards, performance-based bonuses, and other perks.
Comparing Compensation Growth to Average Employee Wage Growth
Now, let’s put things in perspective. How did the growth in Walmart CEO pay stack up against the average wage growth of the everyday employee? It’s a comparison that reveals a lot about the changing dynamics of the company and the economy.
Consider this:
- Over the past two decades, CEO compensation at Walmart has grown significantly, often outpacing inflation and the growth in the overall economy.
- Meanwhile, the average employee wage growth at Walmart has been more modest. While there have been improvements over time, particularly in recent years, the gap between CEO pay and average worker pay has widened considerably.
- This disparity highlights a broader trend in the economy, where the top earners have seen their incomes grow at a faster rate than those in the lower and middle-income brackets.
- Factors contributing to this include the increasing value placed on executive leadership, the rise of stock-based compensation, and the overall performance of the company.
Impact of Economic Conditions and Company Performance
Economic conditions and Walmart’s performance are like the weather for CEO pay – they can bring sunshine or stormy conditions. Let’s look at some examples:
- The 2008 Financial Crisis: During the financial crisis, Walmart’s sales remained relatively stable, but the company faced increased scrutiny. CEO compensation, while still significant, saw a period of more moderate growth. The economic uncertainty led to greater caution in executive pay practices.
- Periods of Strong Economic Growth: During periods of strong economic growth and robust consumer spending, Walmart’s performance often surged. This, in turn, led to higher compensation packages for the CEO, with bonuses and stock awards reflecting the company’s success.
- E-commerce Investments: Walmart’s investments in e-commerce and its ability to compete with online retailers have been crucial. When the company showed strong results in this area, the CEO’s compensation package reflected the importance of this strategic shift.
- Changes in Consumer Spending: Shifts in consumer spending patterns, such as a decline in discretionary spending during economic downturns, can also affect Walmart’s performance. These changes can, in turn, impact the CEO’s compensation, especially if bonuses are tied to sales targets.
Key Milestones and CEO Compensation Figures
Let’s combine key moments in Walmart’s history with the financial rewards of the person at the helm.
Here’s a timeline:
| Milestone | Approximate CEO Compensation (USD) | Notes |
|---|---|---|
| Early 2000s: Walmart expands internationally and focuses on supply chain efficiency. | Several Millions | Compensation included base salary, bonuses, and stock options. |
| Mid-2000s: Walmart focuses on sustainability initiatives and expanding its store network. | Increasing to double-digit Millions | Emphasis on performance-based compensation and stock awards. |
| Late 2000s (2008 Financial Crisis): Walmart navigates economic downturn. | Remained stable | Compensation growth moderated due to economic uncertainty. |
| 2010s: Walmart invests heavily in e-commerce and online retail. | Significant increases, peaking in double-digit millions | Compensation reflected the importance of digital transformation and financial results. |
| Present Day: Walmart continues to adapt to changing consumer behavior and market dynamics. | Substantial | Includes base salary, bonuses, and performance-based equity awards. |
Comparison to Industry Peers
Let’s delve into how Walmart’s CEO compensation stacks up against the leaders of other retail giants. Understanding these comparisons offers valuable insights into the competitive landscape and the factors driving executive pay in the industry. It’s like comparing apples to oranges, sometimes, but we can still gain some clarity.
Compensation Disparities Explained
The differences in pay packages among CEOs of major retailers aren’t just random; they reflect a complex interplay of factors. Company size, measured by revenue and market capitalization, is a primary driver. Larger companies, with more complex operations and greater investor expectations, often justify higher CEO compensation. However, it’s not simply a linear relationship. Performance, as reflected in profitability, stock price appreciation, and strategic achievements, plays a crucial role.
CEOs who consistently deliver strong results, navigate challenging market conditions, and lead their companies to growth are typically rewarded more handsomely. The specific industry, the competitive environment, and the overall economic climate also influence pay decisions. For example, a company operating in a rapidly evolving e-commerce space might offer a different compensation structure than one focused primarily on brick-and-mortar sales.
Compensation Structures in Peer Companies
Understanding the different approaches to executive compensation provides a deeper insight.
- Amazon: Amazon’s CEO compensation, historically, has often included a significant portion of stock-based awards, aligning executive interests with long-term shareholder value. This is due to the nature of the business model.
- Target: Target frequently utilizes a mix of base salary, annual bonuses tied to performance metrics, and long-term incentive plans. These plans may include stock options or restricted stock units, designed to encourage sustained performance and retention.
- Kroger: Kroger’s CEO compensation is usually a combination of base salary, annual incentives based on financial performance, and long-term equity awards. The emphasis on financial targets underscores the importance of operational efficiency and profitability in the grocery industry.
Comparative CEO Compensation Table
Here’s a snapshot of how some major retail CEOs are compensated, remembering that specific figures fluctuate annually. The data provided is for illustrative purposes and based on publicly available information from the latest available fiscal year reports.
| Retailer | CEO | Total Compensation (USD) | Primary Compensation Components |
|---|---|---|---|
| Walmart | Doug McMillon | Approximately $25.3 million | Base Salary, Stock Awards, Bonus |
| Amazon | Andy Jassy | Approximately $212.7 million | Base Salary, Stock Awards |
| Target | Brian Cornell | Approximately $26.6 million | Base Salary, Stock Awards, Bonus |
| Kroger | Rodney McMullen | Approximately $22.4 million | Base Salary, Stock Awards, Bonus |
Public Perception and Ethical Considerations
The compensation of a Walmart CEO, while impressive in its own right, often finds itself under the microscope of public scrutiny. This scrutiny intensifies when juxtaposed against the backdrop of wages earned by many of the company’s frontline employees. This section delves into the nuances of this public perception, the ethical dilemmas it raises, and the influence of shareholders in shaping the narrative around executive pay.
Public Perception of Executive Salaries
The gap between the CEO’s earnings and the average employee’s wage can be jarring. This disparity fuels public perception, often framed through the lens of fairness and social justice. The public frequently questions whether such vast sums are justifiable, especially when compared to the struggles of lower-paid workers. This perception is not just anecdotal; it’s frequently reflected in consumer behavior and brand loyalty.
Ethical Debates Surrounding CEO Compensation
The ethical dimensions of CEO compensation extend beyond mere numbers. The impact on company culture, employee morale, and the overall business model are significant.
“High CEO pay, when perceived as excessive, can create a sense of inequity and erode trust within an organization.”
This quote underscores a critical point: perception matters. If employees believe that their leaders are prioritizing personal wealth over their well-being, it can lead to decreased productivity, higher turnover rates, and reputational damage.
Shareholder Influence on CEO Pay
Shareholders play a vital role in influencing CEO compensation. They have the power to vote on executive pay packages, propose changes, and hold the board of directors accountable. Institutional investors, in particular, wield considerable influence due to their large holdings and sophisticated analysis of corporate performance. Their decisions are driven by a mix of financial considerations and, increasingly, social and governance factors.
Arguments For and Against High CEO Compensation
The debate around CEO pay is complex, with valid arguments on both sides.
- Arguments for High CEO Compensation:
- Attracting and Retaining Top Talent: The argument here is that high salaries are necessary to lure and keep the best executives, who can drive significant growth and shareholder value.
- Performance-Based Incentives: Compensation packages often include stock options and bonuses tied to performance metrics. This incentivizes CEOs to achieve ambitious goals, theoretically benefiting all stakeholders.
- Complex Responsibilities: CEOs bear immense responsibility for the company’s success or failure, navigating complex markets, regulatory hurdles, and competitive pressures.
- Arguments Against High CEO Compensation:
- Exacerbating Inequality: Critics argue that high CEO pay contributes to the widening income gap and social inequality.
- Lack of Correlation with Performance: Studies have shown that CEO pay is not always directly correlated with company performance, suggesting that other factors, such as board dynamics and industry trends, play a role.
- Potential for Short-Term Focus: Incentive structures focused on short-term gains can encourage CEOs to prioritize immediate profits over long-term sustainability and employee well-being.
Factors Influencing CEO Pay
The compensation of a Walmart CEO isn’t just plucked from thin air; it’s a carefully crafted package, a complex equation influenced by a multitude of factors. This intricate process involves various metrics, strategic decisions, and, of course, the ever-watchful eye of the board of directors. Let’s delve into the key elements that shape the financial rewards of leading the retail giant.
Key Performance Indicators (KPIs) Tied to Compensation
Walmart’s CEO’s pay is directly linked to how well the company performs. These performance indicators serve as the benchmarks for success and heavily influence the CEO’s overall compensation. The emphasis on these metrics ensures that the CEO’s interests are aligned with the long-term health and prosperity of Walmart.
- Revenue Growth: This is a fundamental metric. The CEO’s compensation is often tied to the company’s ability to increase its sales year over year. A strong revenue performance usually translates into a higher payout.
- Profitability (Net Income): Ultimately, Walmart is in business to make a profit. KPIs related to profitability, such as net income, are crucial. A CEO who boosts the company’s bottom line is likely to be rewarded handsomely.
- Comparable Sales Growth: This metric focuses on sales from stores open for at least a year. It’s a key indicator of the company’s organic growth and its ability to attract and retain customers.
- Earnings Per Share (EPS): EPS is a critical measure of profitability from the shareholders’ perspective. It directly reflects the value of the company and is a significant factor in CEO compensation.
- Market Share: Walmart’s position in the competitive retail landscape is essential. KPIs that measure market share, like the percentage of the retail market Walmart controls, are important. Maintaining or increasing market share is often rewarded.
- E-commerce Growth: In the modern retail environment, online sales are paramount. The CEO’s compensation will likely be influenced by the growth of Walmart’s e-commerce operations.
- Customer Satisfaction: Happy customers are loyal customers. Metrics related to customer satisfaction, like Net Promoter Score (NPS), can be incorporated into the compensation package.
- Strategic Initiatives: The CEO is expected to lead strategic initiatives, such as expansion into new markets, and the successful implementation of these initiatives can affect their pay.
The Role of the Board of Directors in Compensation
The board of directors holds the ultimate responsibility for setting and approving the CEO’s compensation. This isn’t a casual task; it’s a critical function that demands careful consideration, objective evaluation, and a deep understanding of the company’s goals and the CEO’s performance. The board’s role ensures that the CEO’s pay is fair, aligned with the company’s performance, and in the best interests of the shareholders.
The Negotiation Process for Pay Packages
The negotiation process between the board and the CEO regarding pay packages is often a delicate dance. It’s a balancing act where both sides strive to reach an agreement that is mutually beneficial. The board wants to attract and retain top talent while ensuring that the compensation is aligned with the company’s performance and shareholder value. The CEO, on the other hand, wants to be fairly compensated for their efforts and contributions to the company’s success.
This negotiation typically involves a compensation committee, which is a group of independent directors tasked with evaluating the CEO’s performance, setting compensation, and ensuring that the pay package aligns with the company’s goals.
The Compensation Committee’s Function
The compensation committee within the board of directors plays a pivotal role in the CEO’s compensation process. This committee is composed of independent directors, free from any conflicts of interest, and their primary responsibility is to ensure that the CEO’s pay is fair, reasonable, and aligned with the company’s performance and the interests of the shareholders.
The Compensation Committee’s core responsibilities include:
- Reviewing and evaluating the CEO’s performance against pre-established goals and objectives.
- Determining the CEO’s compensation, including salary, bonus, stock options, and other benefits.
- Overseeing the design and administration of the company’s executive compensation programs.
- Ensuring that the company’s compensation practices comply with all applicable laws and regulations.
- Engaging independent compensation consultants to provide expert advice and guidance.
Tax Implications and Regulations
Navigating the world of executive compensation, particularly at a behemoth like Walmart, means understanding the intricate dance between paychecks, tax laws, and government oversight. The CEO’s compensation package, a complex mosaic of salary, bonuses, stock options, and other perks, is subject to a variety of tax implications that can significantly impact the ultimate take-home pay. This section delves into these complexities, shedding light on how Uncle Sam gets his share and the regulations that keep everything in check.
Taxation of Compensation Components
The various elements of a CEO’s compensation are taxed differently, each with its own set of rules and regulations. This impacts both the CEO and Walmart, shaping financial strategies and compliance efforts.The tax treatment of each component varies:
- Salary: This is the most straightforward component, taxed as ordinary income at the individual’s applicable tax rate. This rate can vary significantly depending on the income bracket.
- Bonuses: Similar to salary, bonuses are also taxed as ordinary income. The withholding rate on bonuses may be higher than on regular salary, though this is ultimately reconciled at tax filing time.
- Stock Options: The tax treatment of stock options is a bit more nuanced.
- Incentive Stock Options (ISOs): When ISOs are exercised, the difference between the fair market value of the stock and the exercise price is not taxed as ordinary income at the time of exercise. However, this “bargain element” is subject to the Alternative Minimum Tax (AMT). When the stock is sold, any profit is taxed as a capital gain.
- Non-Qualified Stock Options (NSOs): When NSOs are exercised, the difference between the fair market value of the stock and the exercise price is taxed as ordinary income. Any subsequent profit from selling the stock is taxed as a capital gain.
- Restricted Stock Units (RSUs): RSUs are typically taxed as ordinary income when they vest (become available to the recipient).
- Perquisites (Perks): Perks, such as company cars, personal use of company aircraft, or club memberships, are generally considered taxable income to the extent they are not directly related to business.
- Deferred Compensation: Income deferred until a later date is taxed at the individual’s applicable tax rate when it is received.
Government Regulations and Policies, How much does a walmart ceo make
Several government regulations and policies significantly influence CEO compensation at Walmart. These are designed to promote fairness, transparency, and accountability.
Here’s a look at some key regulatory impacts:
- Internal Revenue Code Section 162(m): This section, as amended by the Tax Cuts and Jobs Act of 2017, limits the deductibility of executive compensation to $1 million per year for certain top executives, including the CEO. This encourages companies to be more mindful of the tax implications of executive pay packages.
- The Dodd-Frank Wall Street Reform and Consumer Protection Act: This act introduced several provisions related to executive compensation, including “say-on-pay” votes, which give shareholders a non-binding vote on executive compensation packages.
- Securities and Exchange Commission (SEC) Regulations: The SEC requires public companies to disclose detailed information about executive compensation in their proxy statements. This includes the Summary Compensation Table, which provides a comprehensive overview of all compensation components.
- Sarbanes-Oxley Act: This act aimed to improve corporate governance and financial reporting, indirectly impacting executive compensation by increasing scrutiny of financial practices and the accountability of corporate leaders.
Impact of Tax Laws on Executive Pay
Tax laws have a profound impact on how executive pay is structured and the after-tax compensation executives receive. Changes in tax laws can lead to shifts in compensation strategies.
Consider these key impacts:
- Compensation Structure: Tax laws influence the mix of compensation components. For instance, the deductibility limit of Section 162(m) encourages companies to consider performance-based pay, which might be exempt from the limit.
- Executive Behavior: Tax implications can influence executives’ decisions. For example, the timing of stock option exercises or the sale of company stock may be influenced by tax considerations.
- Company Strategy: Tax considerations are a crucial part of a company’s overall compensation strategy. Walmart’s compensation committee, for example, will analyze the tax implications of various pay structures.
- Examples:
- If tax rates on capital gains increase, executives may be less inclined to exercise stock options and sell shares.
- If corporate tax rates decrease, companies might have more flexibility to offer higher salaries or bonuses.
The Role of Stock Ownership
It’s no secret that the corner office at Walmart comes with a hefty price tag, but it’s not just about the salary. A significant portion of the compensation package for the CEO is tied up in stock ownership. This approach is designed to align the CEO’s financial interests directly with those of the shareholders, theoretically encouraging long-term value creation. Let’s delve into why stock ownership is so crucial in this context.
Alignment with Shareholder Interests
The primary purpose of linking a CEO’s compensation to stock ownership is to create a strong alignment between the CEO’s personal financial success and the financial performance of the company. When a CEO owns a significant amount of company stock, their decisions are more likely to be made with an eye toward increasing the stock price. This benefits shareholders, as the value of their investments grows alongside the company’s success.
Think of it as a shared journey where everyone wins when the company thrives.
Vesting Schedules and Their Implications
Stock options and restricted stock units (RSUs) are common components of CEO compensation. These are often subject to vesting schedules, which dictate when the CEO can actually access and benefit from the shares. Vesting schedules typically span several years, encouraging the CEO to stay with the company and focus on long-term goals. A common vesting schedule might be four years, with 25% of the shares vesting each year.
The purpose of vesting schedules is to prevent short-term thinking and ensure that the CEO is committed to the company’s long-term success.
This structured approach acts as a powerful incentive for sustained performance. For example, if a CEO receives a grant of 100,000 shares with a four-year vesting schedule, they wouldn’t be able to sell any shares immediately. They would need to remain with the company and meet specific performance targets to fully realize the value of those shares. This design is intended to prevent the CEO from focusing solely on short-term gains at the expense of long-term stability.
Impact on Decision-Making Process
Stock ownership profoundly influences a CEO’s decision-making process. With a personal stake in the company’s success, the CEO is more likely to:
- Prioritize long-term investments over short-term profits.
- Make strategic decisions that enhance shareholder value, such as acquisitions or expansions.
- Manage the company’s resources prudently, aiming for sustainable growth.
- Be more attuned to the needs and concerns of shareholders.
This alignment aims to create a culture of ownership and accountability, where the CEO is motivated to act in the best interests of the company and its investors. For example, a CEO with a significant stock holding might be more cautious about taking on excessive debt or engaging in risky ventures that could jeopardize the company’s financial health and, consequently, the value of their shares.
Benefits and Drawbacks of Stock Options
Stock options, while designed to incentivize and align interests, have both advantages and disadvantages. Here’s a breakdown:
- Benefits:
- Incentivizes long-term performance and value creation.
- Aligns the CEO’s interests with those of shareholders.
- Can attract and retain top talent.
- Provides a performance-based reward, potentially reducing fixed salary costs.
- Drawbacks:
- Can lead to excessive risk-taking if the CEO is overly focused on short-term stock price gains.
- May not adequately reward CEOs in periods of market downturns.
- Can be complex to understand and administer.
- Dilution of existing shareholders’ ownership when options are exercised.
