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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

#191

Post by cbm-vic-20 »

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…

> If you have RSUs worth 200k per year

I am clearly working at the wrong company.

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

#192

Post by ghaff »

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.

Look at how a lot of valuations dropped during dot-bomb. 50% is nothing.

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

#193

Post by JAlexoid »

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…

That's a load of BS.

You're an employee, not a co-owner. You're paid to do a job and, more often than not, your input is completely irrelevant to the leadership.

And as someone who is paid to do a job, not to be a practical co-owner, you should be paid in cash.

I currently work at a 50 people startup... and guess what? I'm no co-owner, no matter how much options I get. Last reorganization was done without my input... and no one will ask in the future. If you think you're anything more than a service provider - you're either in the executive management or deluded.

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

#194

Post by danbrooks »

amrocha wrote: post #123

https://twitter.com/tobi/status/1570791158691012610 It's funny seeing the example they give has total comp at 200K considering that a year ago they were still paying less than 100K USD (sightly over 100K CAD) for senior staff

I interviewed with Shopify earlier this year and they were offering ~200k for "Senior" tech positions.

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

#195

Post by dcow »

wikfwikf wrote: post #121
twblalock wrote: post #44

Earlier quoted context omitted.

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…

This is foolish. When public companies give stock to their employees, they dilute the stock as much as if they issued stock and sold it. So the cost of that compensation is the same as if it were in cash. If everyone knows that say, Netflix's stock price is guaranteed to go up 20% a year for the next 5 years, then the market price of that stock would suddenly jump up to the point where it no longer makes excess retur…

Specifically regarding your second paragraph: I think you’re overlooking the market’s ability to value tech stock. If everyone knows Netflix is gonna jump 20% a year for the next 5 years then everyone would dump their entire savings, take the penalty and reinvest their IRAs even, into Netflix. Why doesn’t this happen?

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

#196

Post by JAlexoid »

crote wrote: post #97
BMorearty wrote: post #56

Earlier quoted context omitted.

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…

On the other hand, stock compensation does come with significant drawbacks. Due to tax implications, your options might be worth significantly less - if anything at all - because you often have to pay taxes before you are able to sell them. If your company is not yet publicly traded, there is a significant chance it'll be heavily diluted by the time you are able to actually sell it. Even worse, you might never be abl…

> You might not be able to leave the job when you want to

That is something that people love to ignore - vesting periods are created specifically to keep you from leaving for a better job. While keeping the risk for the company fairly low.

Low mobility has been proven time, and time again, to repress income growth in people. (more often linked to owning a home, and not being able to move for a job)

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

#197

Post by ska »

idontpost wrote: post #170
ska wrote: post #151

Earlier quoted context omitted.

You are right that it is different, but it's not unambiguously better. In the rather special case that stock price is monotonically increasing, there is an obvious benefit to locking in the earliest price you can. On the other hand, if you have more cash every paycheck, you can trickle it into other potentially high growth companies and spread your risk. And you don't lose anything by leaving on a date you choose. An…

> You are right that it is different, but it's not unambiguously better. That's a separate issue from the common misconception in this thread that cash is the same as RSUs. RSUs have more risk than cash, and more potential upside. They are unambiguously different.

Agreed - it's a mistake though to focus on the upside only.

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

#198

Post by JAlexoid »

everforward wrote: post #131
gpderetta wrote: post #71

Earlier quoted context omitted.

If you get the cash immediately, then you still buy the stock on the market if you expect it to go up. If the cash also comes on a vesting schedule, if you expect the stock to go up, you could buy call options on the market with expiries that match the original schedule, at the current strike price. Of course this has much more friction and some cost.

Right, but the stocks start earning value immediately and cash bonuses do not. Assuming gains are even at 5% per year, and the bonus is $100k (because the math is easier): With RSU's, you get $400k 1.05^4 (4 years of compounded growth) With cash, assuming you immediately invest the money, you get $100k 1.05^4 + $100k 1.05^3 + $100k 1.05^2 + $100k *1.05 Running those numbers, the RSU's are worth $486,202 at the end an…

Cash sign on bonuses typically get paid out early, and have an "unearned" timeframe.

Therefore you get cash earlier, than any stock.

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

#199

Post by MikeTheRocker »

hamburglar wrote: post #145
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's a matter of the difference between when they are granted versus when you receive them. If I tell you I'm going to give you $100k cash in 4 years, that's wildly different from if I tell you that in 4 years I'm going to give you stock purchased at today's price for $100k. Yes, the upside relies on the stock going up, but that upside can change things quite a bit.

This makes sense, thank you

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

#200

Post by mym1990 »

JAlexoid wrote: post #188
mym1990 wrote: post #152

Earlier quoted context omitted.

Isn't one benefit of these programs(from the employer side) that employees are more directly tied to company outcomes, and thus will put out better work/product? Of course one person won't shift the stock price, but as a collective, over time, it certainly would.

That's just unsubstantiated claim.

Hence the wondering part, I personally have never been in such a structure, so I don't have first hand experience. BUT from everything that I have read, extrinsic motivation such as "work harder so your company does better so your stock goes up" doesn't seem like it would really hold up for too long.
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