If I’m understanding correctly, a company at any given time has a fixed number of shares that split the ownership of that company, thus if a CEO is paid with shares someone else must be giving up their shares.
In: Economics
When a company is setup, various allocations of stock are made. One of those allocations is usually a pool of stocks for incentives for various employees (usually high level). Almost at any time, the company can also issue new stocks which dilute the existing stock values. That has the obvious drawback of lowering the stock price. There’s also many other games that can be played with stock types that is probably way beyond an ELI5 answer.
The short answer is you’re right. Issuing more stocks dilutes the value of current stocks. But, the company may have already set aside (i.e. the company still owns) a set of stock for the purpose of employee incentives.
Latest Answers