17 February 2024 – Freshworks, the software-as-a-service firm, has revised equity incentives for its CEO, Girish Mathrubootham. The earlier multi-year incentive linked to stock price targets, involving a performance-based restricted stock unit (PRSU) award of 60 lakh shares, has been replaced with a new $19 million long-term award. This change reflects the company’s strategic shift to ensure leadership motivation and shareholder value, as detailed in an SEC filing.
Freshworks has opted for a strategic change in the equity incentives provided to CEO Girish Mathrubootham. The decision to alter the performance-based PRSU award of 60 lakh shares was driven by considerations related to stock price hurdles and macroeconomic conditions, beyond the company’s leadership control.
About Freshworks:
Freshworks is a software-as-a-service company that has gained prominence for its innovative solutions. Founded by Girish Mathrubootham, the company has become a key player in the tech industry, offering products and services that address various business needs.
Reasons Behind the Change:
The board determined that the stock price hurdles associated with the CEO PRSU award were significantly distant from the current stock price. This deviation was attributed to macroeconomic conditions beyond the control of the company’s leadership. Consequently, the board decided to cancel the CEO PRSU award and introduce a new annual long-term equity incentive award in 2024.
Impact on Leadership Motivation and Shareholder Value:
Freshworks, in its filing, emphasized that the modification aimed to maintain leadership motivation and align incentives with shareholder value. The shift in approach reflects an understanding of the challenges posed by external economic factors and a commitment to adapting incentives accordingly.
In the fourth quarter of 2024, Freshworks reported a reduced net loss of $28 million, a notable improvement from the $55 million loss in the same period the previous year. The revenue saw a 20% increase, reaching $160 million. For the full year of 2023, the company achieved a reduced net loss of $137 million compared to $232 million in the preceding year. The annual revenue also experienced a 20% surge, reaching $596 million.
Conclusion:
Freshworks’ decision to modify CEO Girish Mathrubootham’s incentives underscores the company’s adaptability to external challenges. By introducing a new long-term equity incentive award, the firm aims to ensure sustained leadership motivation and align rewards with shareholder value. The financial performance, marked by reduced losses and increased revenue, reflects Freshworks’ resilience in navigating industry dynamics.
