OpenAI has eliminated the traditional equity vesting cliff, granting new hires immediate access to stock-based compensation and shortening tenure requirements.

OpenAI plans stock-based compensation for new entrants as part of a broader move to bolster talent retention amid intensifying competition.

OpenAI frames these changes as empowering employees to take risks and lowering the risk of losing unvested equity if they are terminated. Fidji Simo, OpenAI’s chief of applications, has advocated this approach.

Compensation packages in this race can reach into the hundreds of millions for select roles, reflecting the high stakes of securing AI leadership.

Industry reactions are mixed but largely positive on retention and alignment with growth, though some worry about long-term financial sustainability.

Analysts note that ballooning stock-based compensation could affect shareholder returns, with talk of further relaxing vesting rules to stay competitive.

The policy also removes the Best Cliff requirement, reducing tenure milestones from twelve months toward six months and ultimately phasing it out within months.

These shifts reflect a broader industry trend toward flexible equity structures, increasing operating costs and potentially impacting profit margins.

The cliff period for vesting is being shortened to six months, after which vesting occurs quarterly or monthly depending on the role, with Profit Participation Units (PPUs) vesting monthly over four years.

PPUs are designed to share profits with employees, offering an alternative to traditional stock incentives and potentially reducing equity dilution.

OpenAI aims to end conventional vesting timelines altogether to improve retention amid competition from Meta and xAI.

The broader AI industry is in a fierce talent war, with Meta, xAI, Google/Anthropic, and OpenAI offering substantial compensation and incentives to recruit and retain top researchers and engineers.