It doesn't seem like there is much you can do about it though. If you don't have enough resources to retain the good employees that you need, that's a valid issue to raise with the CEO. He can either get you those resources, or else there could be staffing problems. I don't think anyone joining as an early engineer expects to get more equity than a co-founder though. And you yourself said that people like him. So morale-wise, it's probably fine as long as he finds somewhere else in the company to contribute more.
