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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

#91

Post by hedora »

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…

I have heard of these. I wouldn't accept an offer like this unless the fixed comp was 2-3x normal market value for my services.

(The stock of my employers usually goes up during my vesting periods, and usually by well more than is needed to double my total comp -- the 2-3x is risk adjusted)

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

#92

Post by foobarian »

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…

If there is a vesting start delay then it's still not equivalent to an ESPP. But once you're in the middle of the pipeline I guess it's pretty similar.

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

#93

Post by zachur »

MikeTheRocker wrote: post #60
kodah wrote: post #50

Earlier quoted context omitted.

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

It can be preferable because RSU's typically have a basis that reflects the price of the stock at the time they're granted. So if you're granted $100k in RSU's per year at year 0, and the price of the stock doubles by year 1, you'll actually receive $200k worth of stock.

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

#94

Post by rahimnathwani »

jacques_chester wrote: post #69
rahimnathwani wrote: post #7

Earlier quoted context omitted.

Endowment effect.

Or simulation heuristic: https://en.wikipedia.org/wiki/Simulation_heuristic

Yeah. I didn't know the name for this, but have seen it.

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

#95

Post by PuppyTailWags »

neon_electro wrote: post #59
BMorearty wrote: post #56

Earlier quoted context omitted.

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 sh…

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

This is precisely what unions are for. It's possible to develop a professional organization that then informs expected standards of employment, such as shares in ownership of the company. The Actors Guild for example will specify and fight for the intellectual property of actors part of the guild, including in contracts where members of the guild are hired.

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

#96

Post by spaceywilly »

marcinzm wrote: post #80
spaceywilly wrote: post #61

Earlier quoted context omitted.

If your company had offered you the cash value of RSUs instead of the RSUs, would you not have ended up in the same position financially? For example, if your base pay was 200k, and you had a grant of RSUs worth 200k, how is that better financially than getting all 400k in cash?

I'll given an example. If you had $200k in yearly cash compensation from Apple starting in 2019 then you'd make $200k this year. If you had $200k in yearly RSU compensation from Apple starting in 2019 then you'd make $800k this year.

Couldn’t you use the 200k cash alternative to buy AAPL, theoretically, and end up in the same boat? And in that case you can also buy a mix of other stocks to diversify instead of having it all in one company. I’d take cash any day personally.

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

#97

Post by crote »

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…

On the other hand, stock compensation does come with significant drawbacks.

Due to tax implications, your options might be worth significantly less - if anything at all - because you often have to pay taxes before you are able to sell them. If your company is not yet publicly traded, there is a significant chance it'll be heavily diluted by the time you are able to actually sell it. Even worse, you might never be able to sell it. You might not be able to leave the job when you want to, because you are essentially tied to the stock option vesting period. It also significantly increases your personal risk: what happens when the company performs poorly? You might lose both your job and your wealth at the same time.

The way I see it, the antagonistic relationship exists because management is judged primarily by the shareholder value they create. To an employee, the company is their daily life. To a shareholder, the company exists solely as a means to create money. I would not want to work in a company where everyone is driven solely by shareholder value.

Personally, I'd strongly prefer it if the employer had a workers council, and just gave out bonuses when it was doing good. You still share in the benefits, but you have far less personal risk.

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

#98

Post by pc86 »

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…

It is even worse than an ESPP, but also pushes your compensation out up to 90 days from when you should be earning it. It's literally the worst combination of all the options.

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

#99

Post by faangiq »

twblalock wrote: post #81
ericmay wrote: post #73

Earlier quoted context omitted.

If they all wink wink do it at the same time then it doesn’t matter.

Yeah but they aren't. And they won't. If there was collusion going on, compensation never would have skyrocketed over the past decade.

Comp is still 2x less than it should be

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

#100

Post by JAlexoid »

taxman22 wrote: post #79
spaceywilly wrote: post #61

Earlier quoted context omitted.

If your company had offered you the cash value of RSUs instead of the RSUs, would you not have ended up in the same position financially? For example, if your base pay was 200k, and you had a grant of RSUs worth 200k, how is that better financially than getting all 400k in cash?

You’d be granted $200k in RSUs over 4 years, but actually be getting, 20,000 RSUs if the stock price was $10. Fast forward a few years and the stock is trading at $100. You’re now earning 10x more. Edit: added “over 4 years”

Or you could get that cash and buy the same stock, without restrictions that come with RSUs.

Oh... also... "Tax Man 22" - RSU grants are taxed at the time they vest. So if your 20000 RSUs vest at $100, then you pay regular income tax on $100... not lower capital gains tax on the $90 per RSU.

Just the tax benefit is higher on cash, than RSU.

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