The vesting schedule at Amazon, particularly for employees granted Restricted Stock Units (RSUs), is structured with a back-loaded distribution. A significant portion of the total stock grant vests at the four-year mark, which is a substantial increase compared to the vesting that occurs in the preceding years. For example, an employee might receive 5% of their stock in the first year, 15% in the second, 20% in the third, and the remaining 60% in the fourth year. This uneven distribution creates a situation where the value of unvested stock increases dramatically as the four-year anniversary approaches.
This back-loaded vesting schedule serves as a retention mechanism. By concentrating a large portion of the equity compensation at the end of the four-year period, the company incentivizes employees to remain employed. Historically, this approach has proven effective in reducing attrition and retaining talent, especially in a competitive labor market where stock options and equity are key components of compensation packages. Employees are often more hesitant to leave before this major vesting event, as departing would mean forfeiting a considerable amount of potential wealth.
