The COVID-19 pandemic has accelerated digitalization trends, increasing demand for semiconductors at an unprecedented rate. While chipmakers are expanding manufacturing capacity with hefty capital investments, they also list talent scarcity as a top concern.
To retain and attract crucial talent, Taiwan Semiconductor Manufacturing Co (TSMC) has for the first time issued restricted stocks, linking employee compensation with shareholder interests and company performance. TSMC’s board of directors on April 22 approved a plan to offer 2.6 million new common shares as restricted stocks, worth about NT$1.53 billion (US$54.68 million), to reward high-ranking executives who made significant contributions to the company’s performance last year and are key to its growth, and research and development (R&D).
Most TSMC employees receive generous cash bonuses, which this year total NT$69.56 billion, equal to about 13 percent of the company’s total net profit of NT$518.16 billion. Cash bonuses are considered less appealing to high-ranking executives and R&D engineers, as stock bonuses can offer them higher profits. With stock bonuses, employees double as shareholders and can receive cash dividends, which typically leads to lower turnover and better job performance.
Only a handful of tech firms distribute stock bonuses as part of talent retention, as a major change in accounting rules in 2008 recategorized stock bonuses as expenses that reduce a firm’s bottom line. The distribution of restricted shares similarly turns key employees into shareholders, but does not dilute corporate earnings to the same extent as stock bonuses. Most companies launch a share buyback program to repurchase almost the same amount of shares as restricted stock and then cancel those shares afterward. Therefore, a company’s capital shares would not swell by offering restricted shares.
TSMC’s move to offer restricted shares underscores local talent scarcity. The chipmaker has broadened its hiring efforts, turning to second-tier universities and colleges, but has still found it challenging to fill vacancies. In the past, only graduates from prestigious domestic universities — National Taiwan University, National Tsinghua University and National Chiao Tung University — had the opportunity to land a job at the company.
TSMC founder Morris Chang (張忠謀) has said that talent is an important asset of the company and is vital to its competitiveness. Facing nonstop talent poaching from China, TSMC must use any tools at its disposal to fend off competition and safeguard its lead in the tech industry.
To curb talent poaching, the Ministry of Labor has restricted Chinese firms from posting recruitment ads with local job agencies, as a growing number of Chinese firms are building their semiconductor capabilities, including handset vendor Xiaomi Corp (小米), to meet Beijing’s goal of building a self-sufficient Chinese semiconductor supply chain.
Last year, TSMC set out to hire more than 8,000 employees, increasing its headcount from 51,297 in 2019 to 56,831 by the end of last year, according to the company’s latest annual report. It had a low turnover rate of 5.3 percent last year.
TSMC was once a dream employer for university graduates, but many young workers want more flexible working hours and a different work-life balance. Working at high-tech companies is stressful, and often requires working night shifts.
By sweetening its hiring package, TSMC might see a positive trend in its ability to retain crucial talent. It might also herald a new trend of firms issuing restricted shares, as most high-tech companies in Taiwan use TSMC as a model.
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