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Golden Handcuffs

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Re: Golden Handcuffs

#141

Post by jm20 »

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…

Including percentages for startup stock grants is tricky. You have things like common/preferred stock, liquidation preferences, subsequent rounds causing dilution, etc. that the average employee doesn't usually understand. At best it's very confusing and at worst you have actual legal liability issues.

And I would never want my employees to value their stock based on our 409a price, we (like all startups) do all we can to keep that number as low as possible!

Re: Golden Handcuffs

#142

Post by heavyset_go »

CerealFounder wrote: post #125
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…

Your moralizing a non moral argument. Its simply harder to get access to someone else's capital than someone else's time. So people can charge a premium for the capital. I do believe that premium is probably a bit higher than it should be because it used to be EVEN HARDER to get that capital so people are pointing out the slightly outdated examples of cost in order to gain negotiating leverage. In the end our time an…

> Your moralizing a non moral argument.

I'm responding to a common moralizing argument:

> > A common reason I hear for the fact that investors get more equity is because of the "risk" they take on

> Its simply harder to get access to someone else's capital than someone else's time. So people can charge a premium for the capital.

That's just another consequence of our current system favoring those with capital. There's a glut of capital, it's just allocated in manners that favor asset owners over those who work for a living.

A more democratic approach to capital access wouldn't necessarily have to tip the scales in favor of those who already have it.

Re: Golden Handcuffs

#143

Post by zsmi »

adamcstephens wrote: post #109
ghaff wrote: post #77

Earlier quoted context omitted.

Well, in the scenario you're responding to, you're actually asking why an onsite Atlanta employee should be making less than an onsite SF employee (based on the statement that remote should get main campus salary). And the answer is market rates but a lot of people don't like that answer.

If the hiring pool is remote, then the local market rates don’t matter. Perhaps an open cost of living difference could be ok, but there is no market rate justification.

Isn't remote a disadvantage in that case as the pool is larger?

If I'm the employer I don't need to hire everyone.

I just need to hire a small subset of people, relative to the overall population in the pool who meets the qualifications of the job, who are also willing to work for X.

The bigger the pool the bigger the competition and the easier it is to find the matching subset, no?

Re: Golden Handcuffs

#144

Post by xyzelement »

benlivengood wrote: post #136
xyzelement wrote: post #52

Earlier quoted context omitted.

This is an incredibly nearsighted approach for reasons other responses partially point out. First you have confused uncertainty with a bad scenario. For all you know the offer from the first company would end up much higher than from the second but you won't know. Second, and this is probably a bigger deal - lack of exact range often indicates flexibility in seniority, skillset and scope. So in your case, your only g…

> Second, and this is probably a bigger deal - lack of exact range often indicates flexibility in seniority, skillset and scope. The flexibility should be reflected in the job title or level; salary bands are vital to ensure that people at the same level are being compensated equitably and know what they're interviewing for up front. It's totally fine to tell candidates they're going to aim for a L4 position with the…

Jobs are less cookie cutter than your post implies though, especially at the higher levels.

Personal example - my last job (hedge fund) really wanted me. It took them forever to find someone of my profile - a mix of background, technical skills, domain knowledge, and personality so they wanted to have me. The way they set my salary was like this: they looked at what I was making and added enough on top that I couldn't refuse.

The first and last conversation we had about money was at the end of the interview process when they made me a really good offer. I didn't bother negotiating.

If I asked them during the 1st call what the salary was, they wouldn't be able to say because the salary was based on how much they wanted me and my circumstances. You can think that's inequitable and that's valid, but from a persona standpoint I'd be a fool if I had ended the conversation at that time.

Re: Golden Handcuffs

#145

Post by sokoloff »

dahart wrote: post #126
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…

> Sometimes, those workers are paid below market rate I like this justification above all the others; it seems both fair and easy to reason about. If I quit a $200k/yr job to work at a startup for $100k/yr in cash comp, then my time investment, or risk, is $100k/yr, and my stock compensation should reflect that financial value based on today’s valuation of the stock.

You are the ultimate check on that. If the compensation package makes the startup not attractive compared to staying put, you should stay put.

It’s up to the startup to put the offer to you, but up to you whether to take it.

Re: Golden Handcuffs

#146

Post by chris11 »

joshuamorton wrote: post #90
the_only_law wrote: post #88

Earlier quoted context omitted.

Will I at least make the same insane TC CoL adjusted? Or am I more likely to be paid what an average developer in Atlanta can take home or just a bit more?

> Will I at least make the same insane TC CoL adjusted? There's enough disagreement about what this means that its difficult to say. If your goal is to buy a house, you'll be making more CoL adjusted. If you're happy to rent, its less clear cut but still probably close. > Or am I more likely to be paid what an average developer in Atlanta can take home or just a bit more More.

> There's enough disagreement about what this means that its difficult to say.

I remember a talk HR was giving about remote work. Someone asked about COL and salary adjustments. HR didn't mention cost of living, but they did mention cost of labor. That was a new term to me.

Re: Golden Handcuffs

#147

Post by foobiekr »

kelnos wrote: post #94
Bulpi wrote: post #8

I don't mind Golden Handcuffs. Its just one part of a companies toolbox to increase retention. If you would tell me that i get my current additional bonus as it is without splitting it up to 3 years, i would of course take it but i assume that internally they were able to form/create this type of program and the 3 years was an internal bargain chip.

> [Golden Handcuffs are] one part of a companies toolbox to increase retention. Not in any way that's good for the company, though. That'd be a classic application of optimizing for the metric, not in what you really want optimized. Usually if an employee is staying solely or mostly because of the handcuffs, they're not producing their best work, and aren't fully engaged or focused. Do you really want to keep an empl…

> Usually if an employee is staying solely or mostly because of the handcuffs, they're not producing their best work

I know plenty of people with handcuffs, including me, and this doesn't apply to any of them. I think that claim is common but is in fact not justified in the real world. Your top performers are basically top performers for personality reasons.

Sure, if your company spends 10+ years getting to liquidity, which became popular in the mid-201x because not a single one of them was even remotely financially sound and the markets weren't ready to bite that off yet, you had people staying years longer than they should have, but it is not nearly as big a problem as people claim and was, mostly, because the real value was being captured by early/founder insiders in late stage super-sized PE rounds instead of going public.

Re: Golden Handcuffs

#148

Post by dahart »

ska wrote: post #130
dahart wrote: post #126

Earlier quoted context omitted.

> Sometimes, those workers are paid below market rate I like this justification above all the others; it seems both fair and easy to reason about. If I quit a $200k/yr job to work at a startup for $100k/yr in cash comp, then my time investment, or risk, is $100k/yr, and my stock compensation should reflect that financial value based on today’s valuation of the stock.

> based on today’s valuation of the stock. This is the tricky part, especially if you are very early. Really what you want is the (statistical sense) expected value of the equity be something like the opportunity cost, for it to make sense for you. But until the company has been around for a while and through a few rounds, valuation is mostly a fantasy...

It’s not that tricky, because the investors are getting a valuation. The money I risk/invest/forego now because it’s a startup maybe ought to get the same valuation the investors are getting, that’s all.

Re: Golden Handcuffs

#149

Post by gajjanag »

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…

I have heard anecdotally that the situation was quite different in the past. For example, Google became what it is today in part because their early offers were outstanding for the time, compared to what the typical VC/IPO gives today. I would love to know if there is concrete data supporting this. I can't easily find it myself on the net.

Re: Golden Handcuffs

#150

Post by dahart »

sokoloff wrote: post #145
dahart wrote: post #126

Earlier quoted context omitted.

> Sometimes, those workers are paid below market rate I like this justification above all the others; it seems both fair and easy to reason about. If I quit a $200k/yr job to work at a startup for $100k/yr in cash comp, then my time investment, or risk, is $100k/yr, and my stock compensation should reflect that financial value based on today’s valuation of the stock.

You are the ultimate check on that. If the compensation package makes the startup not attractive compared to staying put, you should stay put. It’s up to the startup to put the offer to you, but up to you whether to take it.

Oh, totally agreed 100%. I’m just saying that there is a way to value a time investment that is on par with what financial investors are buying into. It doesn’t need to be some hand-wavy idea of who’s ‘risking’ more due to the unknown chance the startup might fail, and it doesn’t need to speculate about who would be hurt worse. It can be a purely fair and financial idea for early devs; their stock compensation value is the discrepancy between what the startup pays and what their market rate is.
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