We need to rethink employee compensation • Hacker News Board

Re: We need to rethink employee compensation

#271

Post by pjc50 » Wed, Jun 24, 2015, 10:42 PM UTC

dj_axl wrote: post #84

mpdehaan2 wrote: post #7

Earlier quoted context omitted.

This. It seems that it's acceptable in tech culture to use "you have too much stock" a reason to even underpay founders. This is busted logic, as the company could explode at any time, not to the fault of anyone in particular (but sometimes yes). So far, I think I've been in 3 decent startups that all of which failed and do not exist anymore. None of them exited cleanly. Some might, but you might not want to stick it…

> you won't see that money for 8-10 years Amen. Not such a good notion to trade salary for options, when that extra salary could have been invested all that time. $10k in 2005 is equivalent to $17k in 2015, $21k if you consider dividends reinvested.

The options are an investment. It's just that they're "out of the money" when issued. Modal payout is zero, the maximum possible has been tens or hundreds of millions; what is the expected value? Hard to say.

Re: We need to rethink employee compensation

#272

Post by choppaface » Wed, Jun 24, 2015, 10:45 PM UTC

arbitrage314 wrote: post #168

I've made this point before, but since it's a bit relevant here, I'll make it again (sorry to repeat): If you're primarily interested in making money, or if you love the startup but not the compensation, you should NOT work at that startup. If you're a good developer, you can get a better deal by working at an established company and simply investing. This has been true for every startup offer I've ever seen. Ever. I…

This is something else that needs to change: "equity bought as an investor is much less tax toxic than equity options received as an employee of a startup"

Re: We need to rethink employee compensation

#273

Post by jalonso510 » Wed, Jun 24, 2015, 10:45 PM UTC

areyousure wrote: post #255

tptacek wrote: post #222

Earlier quoted context omitted.

Because it depends on the valuation of the company, and nobody can see the future.

Can't the strike price be set in the employment contract right now?

No. Options have to be priced at the time the grant is made, and that price needs to be the then-current fair market value of the company.

Re: We need to rethink employee compensation

#274

Post by ryandrake » Wed, Jun 24, 2015, 10:47 PM UTC

varelse wrote: post #268

ryandrake wrote: post #258

Earlier quoted context omitted.

Congratulate yourself, because you are, for sure, a fortunate outlier! I don't doubt that there exist engineers out there making $250K+, but they are definitely not the norm, big company or small. Check out a bigger sample of Bay Area companies on Glassdoor. My bet is you'll find the middle 90% to be between, say, $90K and $150K.

Really? My starting salary as a level 1 engineer in the first dotcom boom was $115K. Now had I taken a more fun (but as it turns out in reality frequently not very fun) job in the game industry, that salary would have been ~$70K. This of course is an industry segment with its own crazy outliers. Fortunately, someone sensible figuratively smacked me upside the head and convinced me to take a more practical job (which…

That's about 3X what mine was for a similar junior position during the same time period, so again, congratulations :-)

Re: We need to rethink employee compensation

#275

Post by pjc50 » Wed, Jun 24, 2015, 10:52 PM UTC

jackgavigan wrote: post #169

fredkbloggs wrote: post #43

Earlier quoted context omitted.

Not all illiquid assets are worthless. It's specifically the combination of being prohibited from selling and no prospects for ever receiving a dividend that make these shares worthless. In fact, a share you cannot sell but does pay dividends is very similar to the kind of revenue- or profit-sharing arrangements the author suggests.

> ..prohibited from selling... That would be a Big Red Flag for me.

It's the norm for share options. You can't sell them or even in many cases keep them after you quit the company. It's a very circumscribed deal.

Re: We need to rethink employee compensation

#276

Post by nostrademons » Wed, Jun 24, 2015, 10:55 PM UTC

totalrobe wrote: post #174

chrisdbaldwin wrote: post #158

Earlier quoted context omitted.

FWIW I knew a systems architect/senior dev making ~$350k back in 2002. Those numbers are not as blown up as they seem.

I was hoping some of these big numbers would show up on the #talkpay twitter excitement a while back, but didn't see anything close.

There is a very strong incentive when you make that kind of money to not let anybody know that you make that kind of money. There's zero upside and lots of downsides - jealousy, people asking for money, awkward conversations, competition in your niche skillset, etc.

Re: We need to rethink employee compensation

#277

Post by RyanZAG » Wed, Jun 24, 2015, 10:59 PM UTC

areyousure wrote: post #214

tptacek wrote: post #198

Earlier quoted context omitted.

Because when the four years are up, you don't automatically keep getting more options.

I don't understand. The alternative, as I detailed above, is "you get 1000 options per month for the next four years", which is also time-limited.

It's much easier on the accountants and the share spreadsheets to just assign you 48000 shares and make up funny 'vesting' rules than to update the spreadsheet every month to add 1000 shares for you. It's literally just ease of bookkeeping.

When the accounting and law professions catch up with the tech I think we'll see this all being much simpler, as with government and driving licenses and all the other pointless bureaucracy. But judging by how slowly bureaucracy moves, don't hold your breath.

Re: We need to rethink employee compensation

#278

Post by jlarocco » Wed, Jun 24, 2015, 11:01 PM UTC

Jemaclus wrote: post #3

In this market, I tend to think of options as incentives, and not as replacements for salary. Salary gets me in the door and work hard, great people and culture make me want to be there and evangelize, and options incentivize me to work my ass off. (I'd work my ass off without options, but the options really make it easy to say "I will do everything in my power to make this succeed" instead of "I'd rather go spend ti…

> There's a potential for millions, but my lottery ticket is also worth potentially millions of dollars.

In reality, not even that is true for most options and most employees.

For most companies, even doing well and going to an IPO or acquisition isn't going to make more than a handful of employees rich.

Unless you get in very early (employee 10 or earlier maybe) or the company does amazingly well (think Facebook or Microsoft), you're generally not going to get rich off of stock options. If the company does really well you'll buy a new car and pay off your house, but the chances of retiring early are pretty low.

Re: We need to rethink employee compensation

#279

Post by CodeMage » Wed, Jun 24, 2015, 11:05 PM UTC

> The first is a founder pledge that they will do everything in their power to let common holders sell into secondary markets above a certain valuation

And that is where any company, big or small, would lose me. I've been burned too many times by all kinds of people -- from co-worker to VP -- promising to do "everything in their power" to do this or that. Weasel words like those are worth nothing at all.

Re: We need to rethink employee compensation

#280

Post by kentonv » Wed, Jun 24, 2015, 11:06 PM UTC

jalonso510 wrote: post #142

kentonv wrote: post #121

Earlier quoted context omitted.

What you're describing is called "restricted stock" (not to be confused with "restricted stock units", which are entirely different). The idea is that you actually buy the shares upfront at the current 409(a) (legal) valuation, but the company has a right to buy them back if you leave. Founders usually get their shares this way, because at the time of founding the valuation is essentially zero. Early employees may ta…

You can also sometimes early-exercise an option (if the company authorizes it when they make the grant), which ends up being in practice a lot like buying restricted stock while still technically an option, and I think that's what the parent was referring to.

Weird, what is the reason to do that instead of restricted stock? It sounds functionally identical except more complicated and with possibly worse tax implications.

I'm sure there's some silly accounting reason having to do with option pools and cap tables.