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Shopify lets staff decide cash-stock pay mix as shares dive

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Re: Shopify lets staff decide cash-stock pay mix as shares dive

#51

Post by matwood »

its_bbq wrote: post #17
shabbatt wrote: post #13

Earlier quoted context omitted.

When they were printing money endlessly and rates were low, your strategy is sound. However, the house of cards is now crumbling and there is no end in sight to rate rises. My hedge fund manager friend for a private family office is saying we will see double digit rates by end of 2023. If you believe this then you know what to do. If not, you should at least think what such macro conditions would do to liquidity.

ELI Financially Illiterate. What do high Fed interest rates mean in this case?

When the risk free rate goes up (which is what happens when the fed increases rates), then risk gets re-priced across all assets.

Re: Shopify lets staff decide cash-stock pay mix as shares dive

#52

Post by dahfizz »

its_bbq wrote: post #17
shabbatt wrote: post #13

Earlier quoted context omitted.

When they were printing money endlessly and rates were low, your strategy is sound. However, the house of cards is now crumbling and there is no end in sight to rate rises. My hedge fund manager friend for a private family office is saying we will see double digit rates by end of 2023. If you believe this then you know what to do. If not, you should at least think what such macro conditions would do to liquidity.

ELI Financially Illiterate. What do high Fed interest rates mean in this case?

It means that there will be less investment cash pumping up the valuation of startups.

High rates means that there is less liquidity overall (people don't want to borrow money and invest it), and it means that there are decent alternatives to investigating in startups (if T bonds pay 10% guaranteed, why burn cash on a company that will probably fail?)

Re: Shopify lets staff decide cash-stock pay mix as shares dive

#53

Post by LudwigNagasena »

echelon wrote: post #48
paxys wrote: post #35

Earlier quoted context omitted.

This is becoming more and more common at large tech companies. Stripe does the same thing. Over the last decade and a half tech employees have enjoyed massive returns due to stock appreciation during their vesting term, and now employers want to eliminate that. Of course the flip side is that when the stock goes down - like right now - then employees benefit. Ultimately they’re all going to cut out stocks entirely an…

Startups will offer stock and win. If tech workers were united in fleeing giants to found or work at nimble upstarts, we would reap nearly all of the rewards.

The choice depends on your risk tolerance/aversion.

Re: Shopify lets staff decide cash-stock pay mix as shares dive

#54

Post by jayp »

Vvector wrote: post #47
londons_explore wrote: post #34

Earlier quoted context omitted.

So how is it different than just paying the employee cash and recommending that they buy shopify stock? Is it just a user friction thing?

Stock Grants are not an "expense" under Generally Accepted Accounting Principles. So by paying in stock, instead of salary, it increases profits on paper. It does help with cash flow and other tangible benefits. Most employees would be wise to divest much of their company stock as soon as they are allowed. Don't have all your eggs in one basket.

Is this really true?

Re: Shopify lets staff decide cash-stock pay mix as shares dive

#56

Post by BMorearty »

paxys wrote: post #35
tensor wrote: post #28

One crucial thing not often talked about with this plan is that the stock is granted and vests quarterly . In fact, the amount of stock you get each quarter is also variable. E.g. if you choose to have 100k of equity each year, each quarter you get whatever amount of units equates to 25k of stock. So what they've done is nearly completely untie compensation from the stock price. You neither benefit significantly nor…

This is becoming more and more common at large tech companies. Stripe does the same thing. Over the last decade and a half tech employees have enjoyed massive returns due to stock appreciation during their vesting term, and now employers want to eliminate that. Of course the flip side is that when the stock goes down - like right now - then employees benefit. Ultimately they’re all going to cut out stocks entirely an…

Replacing stock compensation with cash salary and bonus would be a terrible idea.

Other industries should be moving toward employee ownership, not the other way around. Employee ownership creates shared incentives. Shared incentives create alignment. Alignment helps eliminate an antagonistic relationship between employees and management. Instead of them vs. us, it moves it more towards all us. Instead of the fat cats and the lowly workers, everyone gets to reap the benefits or share the losses. Of course the founders and execs get more, I'm not saying it's equal, but it is a far better system than pure cash.

Re: Shopify lets staff decide cash-stock pay mix as shares dive

#57

Post by shabbatt »

its_bbq wrote: post #17
shabbatt wrote: post #13

Earlier quoted context omitted.

When they were printing money endlessly and rates were low, your strategy is sound. However, the house of cards is now crumbling and there is no end in sight to rate rises. My hedge fund manager friend for a private family office is saying we will see double digit rates by end of 2023. If you believe this then you know what to do. If not, you should at least think what such macro conditions would do to liquidity.

ELI Financially Illiterate. What do high Fed interest rates mean in this case?

It means the stream of capital being injected into companies, startups, incubators is inversely correlated to fed interest rates.

Likewise for real estate sector, the monthly mortgage payments increase as rates rise and that puts a big strain on the mortgage holder to continue.

Now instead of real estate, think startups, stocks, tech. Everybody is beholden to the obligations at the rate dictated by the fed.

Re: Shopify lets staff decide cash-stock pay mix as shares dive

#58

Post by twblalock »

gpderetta wrote: post #49
paxys wrote: post #35

Earlier quoted context omitted.

This is becoming more and more common at large tech companies. Stripe does the same thing. Over the last decade and a half tech employees have enjoyed massive returns due to stock appreciation during their vesting term, and now employers want to eliminate that. Of course the flip side is that when the stock goes down - like right now - then employees benefit. Ultimately they’re all going to cut out stocks entirely an…

But as long as the cash bonus has the same nominal value as the stock grant there is not much of a downside for the employee as in the worst case they can just buy the stock on the market (which should be possible for a large tech company).

From experience, that's not true. A bonus of $N is worth $N. A stock grant of $N has turned out to be worth $2.5*N or even more, by the time it finishes vesting.

Could it have gone the other way? Of course, and it's often likely that at startups stock could be worth zero. But at large companies, even with the recent dips in stock prices, employees who joined 2+ years ago are better off with stock grants than they would have been with equivalent fixed-size cash bonuses -- so much so, that would often have to take a pay cut to work anywhere else.

Re: Shopify lets staff decide cash-stock pay mix as shares dive

#59

Post by neon_electro »

BMorearty wrote: post #56
paxys wrote: post #35

Earlier quoted context omitted.

This is becoming more and more common at large tech companies. Stripe does the same thing. Over the last decade and a half tech employees have enjoyed massive returns due to stock appreciation during their vesting term, and now employers want to eliminate that. Of course the flip side is that when the stock goes down - like right now - then employees benefit. Ultimately they’re all going to cut out stocks entirely an…

Replacing stock compensation with cash salary and bonus would be a terrible idea. Other industries should be moving toward employee ownership, not the other way around. Employee ownership creates shared incentives. Shared incentives create alignment. Alignment helps eliminate an antagonistic relationship between employees and management. Instead of them vs. us, it moves it more towards all us. Instead of the fat cats…

I can agree with this in principle, but in practice, who gets to write the contract governing this stuff? Do employees get a say?

I had options at my last job. They were worthless to me the entire 4.5 years I spent there. It wasn’t until 2 weeks after I was let go the company announced it was being acquired and my lottery tickets became worth something.

4.5 years of opportunity to be engaged at a deeper level as a shared owner of the business, wasted because the business never wanted me to be a part owner in the first place.

Definitely looking for more companies that operate the way you would expect here!

Re: Shopify lets staff decide cash-stock pay mix as shares dive

#60

Post by MikeTheRocker »

kodah wrote: post #50
pastor_bob wrote: post #43

Earlier quoted context omitted.

Yes, to me this basically sounds like ESPP without the discount

This is how my ESPP works. I couldn't imagine that program replacing my RSUs. What a ripoff to the people attracted by the promise of RSUs. As someone who came into tech with $0 in savings, RSUs are what gave me financial freedom. When a business dilutes that they not only dilute the marginal amount of business that employees get back in return for their contributions but it also takes away another key financial util…

I don't understand how it could be preferable to be paid in public equity you could otherwise buy with cash
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