Reddit CEO Steve Huffman defends his $193 million compensation package
Reddit CEO Steve Huffman discussed his compensation package in a video Q&A posted on the forum.
The CEO's $193 million pay package is a mix of salary and stock.
Reddit is targeting a $6.4 billion valuation as it moves to go public later this week.
Reddit CEO Steve Huffman has received backlash over his $193 million compensation.
Ever since word got out about Huffman's pay, users on Quora, Reddit, and X have criticized the package. Some feel the amount is too high for a platform that doesn't pay moderators or users — and for a company that hasn't been profitable.
"The feel good moment of simultaneously revealing your CEO is overpaid while your risk assessment underscores the important of unpaid moderators," one user wrote in a discussion post about the topic on Reddit.
On Monday, Huffman defended his pay in a video Q&A posted on the platform he cofounded.
"Look, I'm glad this question was asked, because there's been a lot of commentary on this topic," Huffman said.
The CEO said that his compensation was based on salary and stock and that Reddit board members set the amount based on his performance.
A Securities and Exchange Commission filing said Huffman in 2023 got a salary of $341,346, which is relatively low for a CEO of a major public corporation. In February, this was raised to $550,000. He also got a $792,000 bonus last year based on Reddit's user numbers, revenue, and a type of profitability known as adjusted EBITDA that excludes certain expenses.
The bulk of his compensation package is now in restricted stock units and stock options. A lot of this compensation is based on Huffman staying at Reddit through late 2028, and some is triggered by completing Reddit's initial public offering, the SEC filing said.
Half of the stock options vest at $25.29, a relatively easy bar to reach. The other half vest only if Reddit shares reach $45, $60, and $90 in public-market trading over 10 years, the SEC filing says — that's a higher bar and aligns the CEO's interests with shareholders.
A 'big grant' late last year
Huffman said in the video that his "big grant at the end of 2023" was a result of the board canceling existing stock awards and then granting him this new equity package.
"They did this to simplify things for both the company and me and align my performance with the company's performance," the CEO added. "Some of the stock vests at IPO."
However, the SEC filing also says some of Huffman's previous performance-based RSU award was canceled because the grants were "not providing the incentive initially intended." Reddit went on to say that it canceled many of the "PRSUs for which performance had not already been achieved."
Huffman already owns Reddit stock
Huffman already owns about 3.2% of Reddit. The company is targeting a $6.4 billion valuation for its IPO this week. So the CEO's stake would be worth about $200 million, even before his new equity compensation begins to kick in.
Reddit and its investors plan to sell 22 million shares, and they're targeting an IPO price of $31 to $34.
Zuckerberg versus Musk
In contrast, the Meta cofounder and CEO Mark Zuckerberg gets a $1 annual salary and was awarded no bonus and zero equity awards in 2020, 2021, and 2022, Meta's latest annual proxy filing said.
Meta pays more than $20 million a year to cover Zuckerberg's security and use of a private jet. And, of course, he owns a major stake in the company, so if his performance improves, Meta shares should rise, making him wealthier. The company also started issuing dividends, meaning Zuckerberg collects hundreds of millions of dollars a year from those payouts.
Elon Musk is on the other end of the spectrum. His pay package at Tesla has been valued at more than $50 billion. A Delaware judge recently struck down this compensation.
Huffman's chance of getting even richer
Back at Reddit, it's unlikely Huffman will get $193 million in compensation. That's an estimate the company has to make for regulatory and disclosure purposes. It's based on the estimated fair value of the package on a certain date.
His new RSUs vest in installments through late 2028, and the stock options can be exercised over 10 years, but only if Reddit shares hold up and then go higher.
Either way, Huffman is already incredibly wealthy and has a chance to become even richer as Reddit goes public.
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