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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

#101

Post by Sohcahtoa82 »

spaceywilly wrote: post #61
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…

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 joined a startup last year and was given a $200K salary and $50K in stock options. If we're successful and reach a valuation of $5B, my options will be worth $1M.

And that's not even accounting for evergreen option grants and bonuses.

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

#102

Post by pc86 »

knodi123 wrote: post #40
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…

> So what they've done is nearly completely untie compensation from the stock price. But it IS tied to the change in price- right?

Using the example above, you get $25,000 in stock every 3 months. So the number of shares are variable, so the price is irrelevant to you. If you sell as soon as you get it, it's the same as $25k cash, e.g. completely divorced from the stock price.

If it was tied to the stock price, like every other RSU program on the planet, you'd get x number of shares. So as stock price goes up, your compensation goes up. Your compensation is tied to the stock price.

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

#103

Post by knrz »

xal wrote: post #38

Added some additional information here: https://twitter.com/tobi/status/1570791158691012610 It's a really great system. We recommend that people borrow from it liberally.

When people ask about what it’s like doing tokenomics for crypto projects, well, it’s an exercise in applied systems design. Bravo on this system man! Any plans on open sourcing some of the stuff, like the math?

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

#104

Post by hedora »

AYBABTME wrote: post #86
turtlebits wrote: post #83

Earlier quoted context omitted.

Tech base salaries are so high that it's easy to keep RSUs. Also, IME, within the last ~18+ years it's been extremely beneficial to hang onto them.

There's literally no advantage to hang onto them, versus selling them on vest day and reinvesting in a wide set of tech stocks (if that's what you want to invest into).

There is an advantage if you are in the middle of a tech rally, and the other option is the investing in whole market.

All you need to do is time the next downturn...

I have (and continue to) err on the side of diversification. Without fail, I have simultaneously regretted it and done better than colleagues that held and tried to time the market.

I could have realisitically made 2x what I did. However, I also could have made half as much (and know people that did halve their income playing these games). Halving my income would have had a much bigger impact than doubling it.

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

#106

Post by modeless »

nahname wrote: post #76
modeless wrote: post #37

Earlier quoted context omitted.

So it's not an equity grant at all then. It's an employee stock purchase plan. You choose how much of your compensation buys stock and you get a small discount on the purchase price (called "bonus" in the article). That is exactly an ESPP.

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.

The window being one quarter? That still makes this more similar in practice to an ESPP than a standard four year RSU grant.

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

#107

Post by ulfw »

modeless wrote: post #72
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?

If you have RSUs worth 200k per year, standard practice is that you get one grant of 800k at the start of employment, vesting over four years. If you got 200k cash instead, you couldn't buy 800k stock in the first year. That's an extra 600k of upside exposure. If that 600k of extra stock appreciates a lot in the first few years, you are far better off with the RSU grant. If it doesn't, you can quit before it vests an…

I don't know a single tech stock that has (significantly) appreciated over the last 12 months. I know a ton that depreciated by 2/3rds.

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

#108

Post by ulfw »

zachur wrote: post #93
MikeTheRocker wrote: post #60

Earlier quoted context omitted.

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.

And when it halves (like it happened to most tech stock over the last year) you get $50K by year 1. If that doubles you finally get your 100K again by year 2.

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

#109

Post by idontpost »

modeless wrote: post #106
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.

The window being one quarter? That still makes this more similar in practice to an ESPP than a standard four year RSU grant.

ESPP's have special tax rules that RSU's don't so the distinction is still very important.

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

#110

Post by marcinzm »

spaceywilly wrote: post #96
marcinzm wrote: post #80

Earlier quoted context omitted.

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.

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.

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