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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

#171

Post by marcinzm »

RHSeeger wrote: post #158
marcinzm wrote: post #111

Earlier quoted context omitted.

If you joined in 2019 then you'd make around $200k this year. Last year you'd have made around $350k. Still better or equal to getting cash every year.

So, the lottery is better than a savings account, because if you win the upside is much higher? Whether or not stocks options/rsus/whatever are worth more than an increase in salary is very dependent on the timing, the company, and variety of other things. You can just as easily point out losing situations as you can winning; in fact, I'd wager the losing is more common.

It's a fairly controlled bet with relatively little downside (companies are likely to cover a large drop in RSU value) and a lot of upside. Since the vesting window is 4 years, you can sell as soon as things best, you still get a salary and you can switch jobs at any time the risk isn't that high. And since you can make up a decade of regular income in a few years the logical approach is to roll dice when younger if you can.

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

#172

Post by idontpost »

bombcar wrote: post #166
idontpost wrote: post #112

Earlier quoted context omitted.

> Couldn’t you use the 200k cash alternative to buy AAPL, theoretically, and end up in the same boat? No you couldn't. You'd have to put in several years of 200k of cash up front to end up in the same boat.

I assume you could leverage options to get something similarish but with a larger downside.

That's still not "ending up in the same boat".

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

#173

Post by bombcar »

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…

Most employees ditch the stock as fast as they can, and arguably they should.

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

#174

Post by breput »

ryanwaggoner wrote: post #146
breput wrote: post #137

Earlier quoted context omitted.

I generally agree with selling as soon as possible but there are some significant capital gains tax advantages for holding vested RSUs for a year. 15 to 20% vs. 32 to 37%.

They’re taxed as ordinary income when they vest, and only gains and losses from that point are considered capital gains or losses. And your cost basis is the value they vest at, so it’s no different than getting cash and buying those shares immediately. No special advantage to holding for a year vs any other stock you acquire with cash.

> They’re taxed as ordinary income when they vest

That's correct, whether you sell them immediately or hold them.

> and only gains and losses from that point are considered capital gains or losses

That is also correct and was my original point. If you sell immediately, you've already paid the (personal income rate) tax and you're done. But if you don't sell immediately, waiting a year is preferable so you are able to claim the long term capital gain rate instead of paying the short term/income rate.

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

#175

Post by bombcar »

duxup wrote: post #30
mabbo wrote: post #29

Earlier quoted context omitted.

This is a large part of why I feel this way. I grew up near Ottawa, and had a lot of friends whose parents worked at Nortel. They were compensated with a lot of stock, which they held onto (it keeps rising, after all). Their pension plan was mostly invested in the company stock too. When the company fell apart (let's set aside whose fault that is- different topic), they lost their jobs, their savings, their pensions,…

Yeah I knew some folks at the time (.com days) who had life changing type money in company stock and they were able to sell a good portion of it at will. They didn't sell... it did not work out for them. To this day I don't get why they didn't sell at least say $1million and stash it someplace. Sure let the rest ride if you want to do that but man save some. I never asked them about it after their company tanked, I i…

People can feel it’s “disloyal”.

So keep some but don’t keep all!

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

#176

Post by potatolicious »

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, because in order to achieve the same outcome you'd need to have $800K to buy AAPL in 2019. Taking your $200K in cash each year will result in buying $200K of AAPL in 2020, $200K of AAPL in 2021, etc... which bypasses a great deal of the gains.

Part of the power of RSU packages is that is equivalent to a very large stock purchase that is a multiple of your earning power that you earn out of over time.

So yes, if you have a lot of liquid capital, taking a $200K/yr stock package from Apple in 2019 is "equivalent" to putting $800K into AAPL all at once. The trick is that more people can do the former than the latter.

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

#177

Post by bombcar »

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).

Selling them instantly also protects you from selling based on insider knowledge later (most employees won’t really hit this but who knows).

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

#178

Post by JAlexoid »

leoqa wrote: post #138
JAlexoid wrote: post #89

Earlier quoted context omitted.

That is highly dependent on if the stock appreciates. I remember getting a stock grant at IBM in 2011. Let alone, OP's example is you get all cash equivalent of the full stock grant... not vesting part.

You made a bad bet. Many engineers optimize for high growth 4-year grants above all else.

Considering that at that point I was with IBM for 5 years before the grant, that wasn't a bet at all

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

#179

Post by mjr00 »

zibby8 wrote: post #68
mjr00 wrote: post #45

Earlier quoted context omitted.

For the tech sector it's really been more like the last 22 years. There hasn't been an extended downturn in US tech stock since the original dot-com bubble. The 2008 recession ended up being a 1-2 year blip. The COVID contraction was extremely brief. By comparison, if you invested in the NASDAQ in 1999/2000, you'd need to wait 12-14 years to break even. I don't have a crystal ball, of course, but to me things are loo…

But did the bubble already burst in tech? Valuations are very low right now. I don't think we're necessarily at the bottom yet, but I think the worst has already come to pass.

Nobody can predict the bottom, or how low things will go.

But I disagree that valuations are very low. Frankly, many tech companies (Uber, Twitter, etc) are still unprofitable money-losing machines with high valuations because of their potential growth and expectations of future profitability. There's an argument these companies should be worth much, much less.

For the past ~10 years in particular, investors haven't cared about profitability; a market downturn may change that.

Also, as the recession or depression continues, advertising is going to get scaled back and may destroy ad-tech companies like Alphabet/Google and Facebook.

Your prediction is as good as mine, of course. But I'm a bear, expecting a river of blood to flow through the streets of Silicon Valley.

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

#180

Post by vineyardmike »

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…

> 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.

I don’t think this scales to something big. Eg Amazon gives stock. Amazon even gave stock to warehouse workers. I don’t think many people, from warehouse workers to senior AWS SDEs feel a true sense of shared alignment, and I bet many share a sense of antagony with management.

I work at a different megacorp. I don’t feel meaningfully like an owner. My 500k in RSUs is meaningless compared to the $2T market cap. Nancy Pelosi probably owners more shares than me.

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