ASML’s CEO is putting his paycheck on the line for employee morale. It could help retain talent that’s nearly impossible to replace

In a memo to staff first reported by Business Insider, Fouquet said the Dutch chip-equipment maker will build a new Workplace Experience Index into the long-term incentive plan for its senior leaders, including himself and the rest of ASML’s Board of Management. “In the coming years, it will directly influence the remuneration of senior leaders, including the Board of Management,” Fouquet wrote. The change follows ASML’s annual employee survey, which found the company’s engagement index fell to 73.5% this year from 78% in 2025. More than 38,000 of ASML’s roughly 44,000 employees took part. Fouquet acknowledged the drop came after a “disruptive and emotional year” for the company. The new index is built from six survey questions, ranging from whether employees trust senior leadership to make the right decisions to whether they feel safe speaking up, understand their roles, believe their teams operate effectively, and feel their direct manager cares about them. The memo doesn’t say how much weight the index will carry in executive pay or when it will first be applied. Tying top executives’ compensation to employee sentiment is uncommon but not unprecedented; IBM and Aviva have previously included engagement in their executive pay targets, Business Insider noted. A tumultuous year at a company the AI boom depends on ASML is the world’s only supplier of extreme ultraviolet (EUV) lithography machines, which are essential for producing the most advanced semiconductors. The company has benefited enormously from the hundreds of billions of dollars tech giants are pouring into AI infrastructure, posting a record net profit of €9.6 billion in 2025. Even so, on the same day it reported those results in January, ASML announced plans to cut about 1,700 positions, roughly 3.8% of its workforce, mostly in management roles within its technology and IT organizations in the Netherlands and the U.S. The goal, the company said, was to strip out bureaucracy and free its engineers to focus on innovation. Dutch unions pushed back hard. The CNV union said it was “completely taken aback” by the plan, NL Times reported. ASML ultimately negotiated a social plan with four unions (FNV, CNV, De Unie, and VHP2), agreed in principle in May and finalized in June. The deal bars compulsory layoffs until May 1, 2027, and leans on internal redeployment that the company said could save several hundred jobs. In his memo, Fouquet tied the slide in engagement to that upheaval, citing the restructuring turmoil as the reason for linking leadership pay to how employees experience the company. Why is ASML tying executive pay to employee satisfaction? Much of the tech world has moved in the opposite direction, embracing long hours and repeated rounds of layoffs. Some startups have even adopted the “996” schedule, a practice borrowed from China’s tech industry that requires employees to work from 9 a.m. to 9 p.m., six days a week. Job cuts have piled up, too. U.S. employers announced about 1.2 million job cuts in 2025, the most since 2020 and roughly on par with 2008, according to outplacement firm Challenger, Gray & Christmas. Technology led the private sector with 154,445 announced cuts. Overall announced cuts have eased in 2026, falling 39% to 573,195 through September, but tech is moving the other way: the sector’s 165,925 cuts so far this year are up 54% and account for 29% of all job cuts, Challenger’s September report found. The cuts have continued this month. Netflix said it would lay off roughly 1,000 employees, about 6% of its workforce. Microsoft offered voluntary buyouts to about 60,000 employees, roughly a quarter of its staff. And Skydance, the company formed by Paramount’s takeover of Warner Bros. Discovery, warned employees that layoffs are coming. But ASML faces a different calculus, says Martijn Hendriks, deputy scientific director of the Erasmus Happiness Economics Research Organization, who has studied employee engagement and CEO compensation. Because its workforce is so specialized, he argues, ASML has more reason than most tech giants to prioritize employee satisfaction. “The reason ASML does this is because for them attracting talent and keeping talent is like crucial,” Hendriks tells Fortune. “They invest a lot in well-being because these people are so specialized that replacing them just costs a lot of money.” Does CEO compensation affect employees? ASML is tying executive pay to employee satisfaction at a moment when soaring CEO compensation is fueling questions about fairness. The 1,500 top-paid CEOs worldwide received an average 11% real-terms raise in 2025, while the average worker saw just 0.5%, according to a study by the International Trade Union Confederation and Oxfam. Those CEOs earned an average of $8.4 million last year, up from an inflation-adjusted $5.5 million in 2019, Fortune reported. Elon Musk has been at the center of the debate. He became the world’s first trillionaire in June after SpaceX’s record IPO, and his fortune has hovered around that mark since. Tesla shareholders approved a pay package in November 2025 that could award him up to $1 trillion in stock if he hits a series of performance targets. The AFL-CIO valued Musk’s 2025 Tesla compensation at $158.3 billion, about 2.5 million times what Tesla’s median employee earned: $57,243. Hendriks says that, in general, there isn’t a direct link between employee engagement and CEO compensation. But engagement can decline sharply when media coverage spotlights extreme pay packages like Musk’s, he says. Those situations can seriously affect employee performance, according to Trevor Watkins, a University of Oklahoma professor who studies organizational behavior. When fairness is absent, Watkins tells Fortune, “the predicted outcome is going to be anger and resentment.” “These emotions do not bode well for what organizations care about with respect to their workforce. They want them to be engaged and productive, and these perceptions of unfairness and resentment interfere with that.”