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Golden Handcuffs

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Re: Golden Handcuffs

#111

Post by akarma »

joshuamorton wrote: post #95
akarma wrote: post #79

Earlier quoted context omitted.

Nearly every major union I've seen supports seniority-based promotions. I imagine that this is not popular with many employees, and so it cannot be a part of their initial pitch — as you said, not the only approach unions use. If established unions support seniority-based promotions but nascent ones don't publicly support them, it would follow that they must develop into supporting seniority-based promotions. This is…

> Nearly every major union I've seen supports seniority-based promotions. There are a number of well known counterexamples, sports and acting unions/guilds for example. > If you have evidence that unions don't support seniority-based promotions I've yet to see any tech union advocate for this position, and they generally advocate against it. Tech Workers Coalition and the Alphabet Workers Union are the two I know of…

I'm certainly not an expert on unions, so thank you for the detailed reply!

> There are a number of well known counterexamples, sports and acting unions/guilds for example.

I can't imagine how promotions would apply to areas like sports and acting the same as it applies to typical careers that have ladders, so I wouldn't cite it as a well-known counter-example.

> I've yet to see any tech union advocate for this position, and they generally advocate against it. Tech Workers Coalition and the Alphabet Workers Union are the two I know of in this case.

With regards to the Tech Workers Coalition, they want "explicit criteria to achieve (promotions)" [1] which would necessarily involve more red tape and likely a seniority-basis, as not every employee can be promoted.

> Despite that the most sought-after biglaw companies use a mostly-tenure based compensation process.

This is a reason why I elected not to go to law school, and a contributing factor for several people I know who moved from law to tech. The lack of this is what makes tech unique and adopting the homogeny of another un-meritocratic industry should certainly be avoided.

[1] https://techworkerscoalition.org/bill-of-rights/

Re: Golden Handcuffs

#112

Post by dbt00 »

HWR_14 wrote: post #105
sokoloff wrote: post #15

Earlier quoted context omitted.

It’s reasonable to ask “what percentage does this represent on a fully-diluted basis?” It is entirely unreasonable to ask for a percentage of the company which can never be diluted by a future fund-raising round. Doing so just telegraphs that you don’t know how venture funding/corporate finance works.

How would they know what fully-diluted would be? Wouldn't there be unknown number of rounds at unknown valuation before liquidity? Or do you just mean based on current expectations. Because, if the latter, how do you hold them to that?

Fully diluted is not the same as future diluted, it just means including all the available options currently allocated but not exercised.

Re: Golden Handcuffs

#113

Post by 908B64B197 »

tick_tock_tick wrote: post #92
choppaface wrote: post #4

The C-level to IC comp ratio is still way too astronomical. If a VC is telling you he feels there’s a better way to comp, he has a financial interest in ensuring your loss. Do not support investor-focused comp models like backweighted vesting (Amazon) or outright fraud like a start-up giving you a stock offer with no percentage or no 409A. Employees deserve high-quality equity on par with investors. The OP’s suggesti…

> Employees deserve high-quality equity on par with investors Why? As an employee I'm taking on nearly 0 risk. Maybe if they are paying me poorly I can see the argument where I'm "investing" more time/work into the company that I am being paid for and that difference should be made up with equity but otherwise this seems divorced from reality.

> Why? As an employee I'm taking on nearly 0 risk.

I'm not sure how you are pricing things. FAANG stock comp is guaranteed money; You can sell it as soon as it vest for exactly the amount you signed for. Startup equity, not so much (there's no guarantee that a liquidity event will ever happen for starter).

Unless you are working in a lower tier market where stock comp isn't the norm.

Re: Golden Handcuffs

#114

Post by compiler-guy »

darod wrote: post #75

Is he misusing the definition for "golden handcuffs"? From my understanding, the issue is that an employee has 90 days to exercise one's options. Most can't afford to do so if the company isn't public due to the cost to exercise and the tax burden. I'm not sure how this new options structure addresses that.

The term isn't very precise, but is generally taken to mean "promised future compensation". The 90-day rule for exercising illiquid options absolutely is one form of promised future compensation, but so are future options clearly in the money, or even highly-appreciated real shares about to vest.

So he isn't misusing the definition, just using the broadest possible sense of the term.

Re: Golden Handcuffs

#115

Post by lukevp »

heavyset_go wrote: post #89
choppaface wrote: post #4

The C-level to IC comp ratio is still way too astronomical. If a VC is telling you he feels there’s a better way to comp, he has a financial interest in ensuring your loss. Do not support investor-focused comp models like backweighted vesting (Amazon) or outright fraud like a start-up giving you a stock offer with no percentage or no 409A. Employees deserve high-quality equity on par with investors. The OP’s suggesti…

> Employees deserve high-quality equity on par with investors. There is no reason that labor and time couldn't build equity, it's just that our current system favors those who use capital to build wealth over those who need to sell their time and labor to build wealth. A common reason I hear for the fact that investors get more equity is because of the "risk" they take on, as if losing some money is the only risk on…

I think you’re hand waving away that money is a store of value, and indirectly of time spent. The money investors have also came from them creating value by doing some activity. It doesn’t materialize independently. And it is still a risk to lose that money that they earned by trading their own time in the past.

Re: Golden Handcuffs

#116

Post by ithkuil »

heavyset_go wrote: post #89
choppaface wrote: post #4

The C-level to IC comp ratio is still way too astronomical. If a VC is telling you he feels there’s a better way to comp, he has a financial interest in ensuring your loss. Do not support investor-focused comp models like backweighted vesting (Amazon) or outright fraud like a start-up giving you a stock offer with no percentage or no 409A. Employees deserve high-quality equity on par with investors. The OP’s suggesti…

> Employees deserve high-quality equity on par with investors. There is no reason that labor and time couldn't build equity, it's just that our current system favors those who use capital to build wealth over those who need to sell their time and labor to build wealth. A common reason I hear for the fact that investors get more equity is because of the "risk" they take on, as if losing some money is the only risk on…

Playing devil's advocate:

But the employee's time is a replenishable resource (1 second per second).

The Total risk is not losing your job. It's losing your job + struggling strongly to find another one (considering loss income while searching, stress, ...). Or workplace injury / death.

An investor, while facing low to none risk of workplace injury / death, can permanently lose the investment and won't recover it ever (hopefully the investor hedges it with other investments)

Re: Golden Handcuffs

#117

Post by compiler-guy »

"A bird in hand is worth two in a bush."

This seems to make long-term ccompensation even more volatile. Who says the company will grant me a similar options package all 4-years. Business needs change, and it might do any of a million other things.

Sure, the stock-price may go up, or may fall, but that is somewhat out of the day-to-day control of the company. Or it is much more out of the company's control than next year's personnel budget, where you just have to convince the CFO of what the right grant value will be.

Re: Golden Handcuffs

#118

Post by ska »

sokoloff wrote: post #15
ProAm wrote: post #6

Earlier quoted context omitted.

Always ask for a non-diluatable percentage early on.

It’s reasonable to ask “what percentage does this represent on a fully-diluted basis?” It is entirely unreasonable to ask for a percentage of the company which can never be diluted by a future fund-raising round. Doing so just telegraphs that you don’t know how venture funding/corporate finance works.

> It’s reasonable to ask “what percentage does this represent on a fully-diluted basis?”

Not only reasonable, but you really should. If they won't answer it's a bad sign.

Re: Golden Handcuffs

#119

Post by ska »

ithkuil wrote: post #116
heavyset_go wrote: post #89

Earlier quoted context omitted.

> Employees deserve high-quality equity on par with investors. There is no reason that labor and time couldn't build equity, it's just that our current system favors those who use capital to build wealth over those who need to sell their time and labor to build wealth. A common reason I hear for the fact that investors get more equity is because of the "risk" they take on, as if losing some money is the only risk on…

Playing devil's advocate: But the employee's time is a replenishable resource (1 second per second). The Total risk is not losing your job. It's losing your job + struggling strongly to find another one (considering loss income while searching, stress, ...). Or workplace injury / death. An investor, while facing low to none risk of workplace injury / death, can permanently lose the investment and won't recover it eve…

> It's losing your job + struggling strongly to find another one (considering loss income while searching, stress, ...).

This is what severance clauses are for.

> Or workplace injury / death.

This is what insurance is for.

Re: Golden Handcuffs

#120

Post by tyre »

oogabooga123 wrote: post #43
azinman2 wrote: post #38

Earlier quoted context omitted.

You’d have to be one hell of a hire to convince anyone to agree to something that will complicate all finance rounds going forward. I cannot imagine the average employee could get away with this.

It’s as easy to imagine as it is to imagine a VC getting this kind of deal. The first employees are the ones who literally build the company and usually take far greater personal risk

I cannot imagine a competent and well-informed founder accepting an investment on these terms. Prorata is fine for larger investors, but explicitly undilutable is idiotic.
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