Shopify lets staff decide cash-stock pay mix as shares dive • Hacker News Board

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

#261

Post by junofan » Sat, Sep 17, 2022, 12:06 AM UTC

RHSeeger wrote: post #154

sulam wrote: post #141

Earlier quoted context omitted.

While I would avoid trying to time the market, anyone starting now has a much lower "cost basis" (they're not spending money, it's not a cost) and better chance at their RSUs appreciating while they vest. Using the last 12 months as a guide for the next 4 years isn't a reasonable way to analyze this.

> they're not spending money, it's not a cost I'm not sure I follow that. If you're getting those shares instead of a higher salary, there's no effective difference between that and a cost you paid out of pocket (except for certain tax implications).

You get 4 years of exposure. You can’t pre-allocate 4 years of salary. That is the difference.

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

#262

Post by junofan » Sat, Sep 17, 2022, 12:41 AM UTC

ska wrote: post #197

idontpost wrote: post #170

Earlier quoted context omitted.

> 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.

You can protect downside by switching jobs. For many people on this thread there’s no mistake.

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

#263

Post by junofan » Sat, Sep 17, 2022, 12:48 AM UTC

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…

Typically comes from the buyback pool, and buybacks are preferred to dividends for a variety of reasons, so in practice what you’re saying doesn’t apply.

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

#264

Post by junofan » Sat, Sep 17, 2022, 12:49 AM UTC

wikfwikf wrote: post #237

joshl32532 wrote: post #219

Earlier quoted context omitted.

> 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. Companies DO prefer to grant RSU instead of cash bonus, because it'll provide liquidity to their stock and make employees engaged with the company's performance. One of Netflix's benefit is they're cash heavy in their compensation…

Buybacks are not alchemy; buying back stock just uses the same money that you saved when you issued stock instead of paying in cash. Of course, the stock price might have gone down, but also it might not. Companies don't usually time buybacks right to buy stock cheaply.

Oh, no, generally buybacks are timed strategically.

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

#265

Post by junofan » Sat, Sep 17, 2022, 12:50 AM UTC

marvin wrote: post #247

mrguyorama wrote: post #210

Earlier quoted context omitted.

There have been multiple times in the past decade that FAANG colluded to decrease wages.

I wonder what kind of collusion Europe is up to, with salaries at 50%-20% of those available in the US.

Productivity is generally lower.

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

#266

Post by yibg » Sat, Sep 17, 2022, 12:56 AM UTC

breput wrote: post #174

ryanwaggoner wrote: post #146

Earlier quoted context omitted.

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…

There is no difference between holding them for a year compared to selling when they vest and then buying another stock and holding that for a year.

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

#267

Post by valzam » Sat, Sep 17, 2022, 1:03 AM UTC

RHSeeger wrote: post #260

MichaelBurge wrote: post #168

Earlier quoted context omitted.

No, the downside exposure is limited because you can quit your job. You don't have to actually eat a stock drop loss by working for 4 years and vesting a loser, you can change to another job and reset your basis.

You were being paid less because you received those RSUs. The downside is set at the difference between what you got paid and what you would have been paid had there not been RSUs in the equation.

I think the reality is though that is is extremely difficult to find a job that would pay a comparable total comp in all cash. You choice isn't 200k cash, 200k rsu vs 400k cash since the 400k cash offer doesn't really exist. What is more, at least in Europe and Australia and ignoring tiny seed stage startups, the places that give out substantial equity actually pay MORE in cash than more traditional, regional companies.

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

#268

Post by ojbyrne » Sat, Sep 17, 2022, 1:04 AM UTC

JAlexoid wrote: post #100

taxman22 wrote: post #79

Earlier quoted context omitted.

You’d be granted $200k in RSUs over 4 years, but actually be getting, 20,000 RSUs if the stock price was $10. Fast forward a few years and the stock is trading at $100. You’re now earning 10x more. Edit: added “over 4 years”

Or you could get that cash and buy the same stock, without restrictions that come with RSUs. Oh... also... "Tax Man 22" - RSU grants are taxed at the time they vest. So if your 20000 RSUs vest at $100, then you pay regular income tax on $100... not lower capital gains tax on the $90 per RSU. Just the tax benefit is higher on cash, than RSU.

I think that extra cash gets taxed at regular income rates.

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

#269

Post by neon_electro » Sat, Sep 17, 2022, 2:07 AM UTC

lr4444lr wrote: post #156

neon_electro wrote: post #64

Earlier quoted context omitted.

Not when the best the nimble upstarts are offering in positions where equity is on the table are options, not shares. I’m all for more employee ownership and engagement from being a shareholder in addition to an employee, but I’d love to see startups equally interested in that.

I don't think you want this. Even in a firm that is under 10 mil., if you are granted hard equity, you're going to be liable for taxes on those shares, which will be extremely illiquid. Options or RSUs let you have your cake and eat it too, at a small price.

You're right - I don't want to touch equity any more. I know how to buy stocks and bonds for mid-to-long term investments, I hope and expect my next employer to prioritize cash/salary-based compensation.

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

#270

Post by neon_electro » Sat, Sep 17, 2022, 2:09 AM UTC

BMorearty wrote: post #78

neon_electro wrote: post #59

Earlier quoted context omitted.

I can agree with this in principle, but in practice, who gets to write the contract governing this stuff? Do employees get a say? I had options at my last job. They were worthless to me the entire 4.5 years I spent there. It wasn’t until 2 weeks after I was let go the company announced it was being acquired and my lottery tickets became worth something. 4.5 years of opportunity to be engaged at a deeper level as a sh…

Were you able to exercise those options after the acquisition was announced? Did you finally get the payday you were hoping for?

Yes - the contract I had agreed to allowed for some time to elapse after being let go and I would still be able to exercise the options.

I got a payday of $27k before taxes, $18k after taxes. In my opinion, I should've negotiated $10k additional salary if not more when I got the job; it would have been a far better payout without any 4 year requirement of loyalty (I was not appropriately rewarded for said loyalty).