The other day, an article with a loaded headline, said Flipkart’s top executives were overpaid. It then lined up a comparison with Amazon’s top brass in India, as if to show that Amazon was much more frugal about paying employees.
Almost everybody had an opinion. And many so called ‘entrepreneurs’ and ecosystem experts criticised their salaries on Facebook. “How could they? Right?” But this couldn’t have been more wrong
Sure enough, almost everybody had an opinion. And many so called ‘entrepreneurs’ and ecosystem experts criticised their salaries on Facebook. “How could they? Right?” But this couldn’t have been more wrong.
The following was the remuneration reported in Qz.
What the article missed was the fact that Mekin Maheshwari, Amod Malviya and Sameer Nigam, all three were very early employees of Flipkart. They had liquidated a portion of their stock options to make that money. Mukesh Bansal had sold Myntra to Flipkart and had liquidated a portion of his shareholding to make that money in FY16.
The article even had two additional fields, showing their age and work experience. As if it were to suggest that one must be paid according to one’s work experience; how could these young guys be paid more than their experienced counterparts at Amazon?
Though Flipkart is known to pay its employees above market salaries (you have to pay well to acquire the best talent), this is not the case here.
Though Flipkart is known to pay its employees above market salaries (you have to pay well to acquire the best talent), this is not the case here
Since I’ve seen experienced folks asking noob questions, let’s try to put this in perspective. Really, it’s something everyone who’s ever really done a real startup ought to know. Startups offer stock to early employees when they join the company. This is in return for the risk they are taking and for burning the candle on both ends for many months. When the stock vests, they can sell it. When the stock is offered, it isn’t worth a lot. If early employees work hard and smart and make the company a success, the stock gains in value. In subsequent rounds, the company’s value goes up.
In most cases, the stock is worth nothing because the startups don’t do well. In some cases, like in the case of Flipkart, the stock is actually worth something and people who worked to make it valuable are rewarded.
“The remuneration figures cited include a significant portion of liquidated ESOPs that had been accumulated over the years” — Flipkart statement
Flipkart itself has clarified this in a statement. It said: “The remuneration figures cited include a significant portion of liquidated ESOPs that had been accumulated over the years. The law does not require liquidation of ESOP details to be separately stated and the (RoC) filings have been made by disclosing all the particulars mandated by the law.”
Comparing this with the salaries paid by Amazon, a 22-year-old company, to its senior employees shows a complete lack of understanding of how things work. The right thing to do would be to compare this with early employees of Amazon.
The worrying bit is the alarming number of people who outraged against Flipkart over the remuneration. It’s almost as if it’s a crime to make money in India, even if you’ve worked hard for it. This can’t be good for entrepreneurship.
Also read: Flipkart’s FY16 performance in 5 charts
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Disclosure: FactorDaily is owned by SourceCode Media, which counts Accel Partners, Blume Ventures and Vijay Shekhar Sharma among its investors. Accel Partners is an early investor in Flipkart. Vijay Shekhar Sharma is the founder of Paytm. None of FactorDaily’s investors have any influence on its reporting about India’s technology and startup ecosystem.