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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

#251

Post by marssaxman »

sokoloff wrote: post #205
paulmd wrote: post #167

Earlier quoted context omitted.

incentivizing productive employees (the ones with the most alternatives) to quit if the stock price (or the stock market generally) goes down is a hell of a side-effect when you put it like that. I guess that's the monkey-paw side of "incentivizing the employees to make the company perform by giving them a stake in the upside"...

That’s why a lot of companies will issue special grants to their highest performing/most critical employees if the shares drop a lot. That makes for a good “double dipping” if the shares recover.

Real Networks did that for us, after the dot-com crash. The stock promptly dropped some more, and never recovered. I've been deeply skeptical of stock-based compensation ever since...

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

#252

Post by ranman »

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…

Do you know if this creates significant administrative overhead?

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

#253

Post by tharkun__ »

marcinzm wrote: post #243
tharkun__ wrote: post #228

Earlier quoted context omitted.

That assumes you just keep the cash. I think what they meant was: First year make 400k, buy 200k worth of something that is not just one egg basket. But because it's salary you do that every ~2 weeks so you end up with hopefully more than 200k by end of year already too. Continue example over the other 3 years. Yes the upside is smaller as I would assume the broader market part would return less in the upside case. T…

You can also invest the RSUs that vest or keep them. In my example I assumed you cashed them out instantly and did not invest the resulting cash. So while the cash looks better with investments so do the RSUs. That also means the risk of RSUs is also not as high as you paint it out since you don't keep them for 4 years. After the 1 year cliff you can sell them as they vest. So you're only risking future money rather…

I see it this way: with RSUs you are betting on one egg. Your company. There are things about RSUs that make them more attractive than getting cash and betting on another single egg. If I can get cash instead I will. I don't count the RSUs as a decider in that sense. Given my risk tolerance I'll take extra cash if I can and invest it into multiple eggs instead. Over the past 10 years that probably would have made me loose out on money. We will see how it goes in the next few. When all tech stocks are tanking I bet it's going to be hard to switch to another company where things would be better. Having bought stocks that have paid dividends through many years of recessions with the cash I got seems better to me. Of course you could have sold those sweet RSUs and bought more of those same dividend paying stocks than I can. Power to you if you did. Somehow I doubt most people that choose the RSUs have done that and instead only cashed out to buy a house or a Tesla etc. Not saying that's you or everyone. I drive a 11 year old car I bought used. And would even if I had taken RSUs ;)

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

#254

Post by PragmaticPulp »

twblalock wrote: post #44
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…

Why on earth would employers want to eliminate those massive returns? That's been an amazing tool for employee retention, especially for FAANG. If they reverted to paying cash plus bonus, they would be less competitive when hiring and retaining people. The companies that are changing this are the ones whose stock tanked, and they are worried that employees will leave because of it. Companies whose stock did not tank…

> The companies that are changing this are the ones whose stock tanked, and they are worried that employees will leave because of it.

This is exactly why companies are doing it.

If you're compensated in units of stock and the stock price goes down, you are incentivized to switch to another company to restart the whole process.

It's a negative feedback loop. Company struggles -> stock price declines -> employees leave -> company struggles more -> repeat.

I know employees want the best of both worlds (stock appreciation when it goes up, refreshers when it goes down) but realistically I expect more companies to move toward defined cash payouts now that we're out of the unusual bull market of the past decade.

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

#255

Post by [deleted] »

kodah wrote: post #239
MajimasEyepatch wrote: post #211

Earlier quoted context omitted.

True, but there's an opportunity cost to having worked at Company X on the assumption that your RSUs would appreciate in value, when in fact they decreased and you could have worked at Company Y instead.

Anecdotally, I've never had RSUs depreciate to a point at which I metaphorically lose money for my efforts. This might happen at startups more often and megacorps less often.

[deleted]

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

#256

Post by asimpletune »

kodah wrote: post #239
MajimasEyepatch wrote: post #211

Earlier quoted context omitted.

True, but there's an opportunity cost to having worked at Company X on the assumption that your RSUs would appreciate in value, when in fact they decreased and you could have worked at Company Y instead.

Anecdotally, I've never had RSUs depreciate to a point at which I metaphorically lose money for my efforts. This might happen at startups more often and megacorps less often.

This has been the case for a while, but also people who started at FB two years ago did very badly.

Again, usually it works out.

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

#257

Post by organsnyder »

marcinzm wrote: post #110
spaceywilly wrote: post #96

Earlier quoted context omitted.

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.

No, the future unvested RSUs increase in value with the stock price. Your cash comp doesn't. If you got cash then you'd have made $200k the first year, $200k the second and $200k the third. If you got RSUs then you'd have made $350k the first year, $660k the second and $800k the third.

Your unvested RSUs also decrease in value with the stock price. That was my position as a fairly recent Shopify hire.

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

#258

Post by kayson »

JJMcJ wrote: post #240
nahname wrote: post #76

Earlier quoted context omitted.

An ESPP is directing earned cash into stock. You buy the stock at time of payment. This is directing equity into RSUs or ISOs at the open of the window. You will be subject to price fluctuations over the window, which you wouldn't be with an ESPP.

RSUs are usually granted as number of shares, rather than value of shares at the time of purchase. Share price 50, you get 100 shares as RSU grant, worth 5,000. Share price 50, you get $5,000 in shares, that's 100 shares. Share price , you get 125 shares.

Qualcomm grants RSUs based on the value at the time of the grant, not number of shares. If they tell you you're getting $50k, that's what you get. Of course it moves around with the market over the course of the beating schedule. It also creates a perverse incentive since its better for the stock to be low when receiving a grant.

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

#259

Post by RHSeeger »

sulam wrote: post #163
RHSeeger wrote: post #154

Earlier quoted context omitted.

> they're not spending money, it's not a cost I'm not sure I follow that. If you're getting those shares instead of a higher salary, there's no effective difference between that and a cost you paid out of pocket (except for certain tax implications).

Shopify's plan is an oddity in the industry, normally one doesn't directly trade RSUs and base comp. Netflix has allowed for this (probably still does, but I haven't negotiated against a Netflix offer recently), but I don't know of any other significant examples. That said, legally, even in the specific case of the Shopify plan, you aren't taking cash and spending it on Shopify stock. If you were, your tax situation…

> normally one doesn't directly trade RSUs and base comp

You do, it just isn't spelled out. If you're getting comp in one way (RSUs), then you're not getting it in other ways (salary). The same is true of other benefits, like free food, 401k contributions, etc. It generally isn't a 1-to-1 thing, but it _is_ a tradeoff.

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

#260

Post by RHSeeger »

MichaelBurge wrote: post #168
RHSeeger wrote: post #153

Earlier quoted context omitted.

> That's an extra 600k of upside exposure. It's also an extra 600k of downside exposure.

No, the downside exposure is limited because you can quit your job. You don't have to actually eat a stock drop loss by working for 4 years and vesting a loser, you can change to another job and reset your basis.

You were being paid less because you received those RSUs. The downside is set at the difference between what you got paid and what you would have been paid had there not been RSUs in the equation.
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