Cash-rich companies (especially the large tech ones) do share buybacks very regularly. Facebook bought back $14.4B worth of shares in Q3 2021, and announced a further $50B worth of buybacks in the coming quarters (https://www.yahoo.com/now/facebook-warns-fourth-quarter-head...). Diluting existing shares to give out employee bonuses are comparatively a drop in the bucket.

Thin air, although most tech companies are buying back more shares than they give out.

They issue more stock and the existing investors’ ownership is diluted.

Depends on the company. Dilution is normal, but some companies are buying back stock to use up excess cash; in this case, they can issue those shares to employees.