Golden Handcuffs • Hacker News Board

Re: Golden Handcuffs

#41

Post by gkoberger » Thu, May 13, 2021, 5:46 PM UTC

This sounds employee-friendly, but it's total BS.

You'll just be getting less equity at a higher strike price every year, so it's just a sneaky way for these companies to give employees less. They can still say "we're giving you $100k in stock this year", but it's a lot less stock since you're not locked into a strike price.

If you want to leave after 1 year (post-cliff), you can leave under either scheme and get 1 year's worth of equity. This doesn't solve any "golden handcuff" problems, it just hurts employees.

Re: Golden Handcuffs

#42

Post by pc86 » Thu, May 13, 2021, 5:48 PM UTC

bps4484 wrote: post #20

seasoup wrote: post #9

This is a plan that is much worse for employees, being presented as if it were better. At least be honest about feeling like you are paying employees too much equity up front and want to pay them less.

To me this all depends on how it's implemented but you're right to be suspicious. If all they do is give you 1/4 of the equity they were going to give you previously, then yes it drastically reduces employee upside to the benefit of others (execs, investors). But they probably can't do that because it would be harder for them to attract talent against a 4 year vest company. Instead they'll probably have to bump up th…

I'm suspicious of this as well, but would this be better for a lot of employees? Go to Coinbase, get your 25% stock in 25% of the time, then "just" go somewhere else and get more. It's not unheard to return to a company later (Coinbase in this case) and get a better title, additional grant, etc.

Re: Golden Handcuffs

#43

Post by oogabooga123 » Thu, May 13, 2021, 5:49 PM UTC

azinman2 wrote: post #38

oogabooga123 wrote: post #31

Earlier quoted context omitted.

I’ve scored deals that can’t be diluted for X years after liquidity event, so employees should be able to as well. Don’t put people down with “you must not know what you’re talking about”.

You’d have to be one hell of a hire to convince anyone to agree to something that will complicate all finance rounds going forward. I cannot imagine the average employee could get away with this.

It’s as easy to imagine as it is to imagine a VC getting this kind of deal. The first employees are the ones who literally build the company and usually take far greater personal risk

Re: Golden Handcuffs

#44

Post by logicslave » Thu, May 13, 2021, 5:50 PM UTC

nineplay wrote: post #40

logicslave wrote: post #34

Earlier quoted context omitted.

I mean you can just go on levels.fyi and see the comp for yourself. Recently FB has been giving ~350k for a senior developer working remote. Thats great money for someone in the mid west. Studying a few months for a job that could set you up financially for a long time is a great deal.

Call me cynical, but they are supposed to be trying to recruit me. I say "That doesn't sound like more than I currently make, what about other forms of compensation?" If they say "well we're not sure...", I'm going to be pretty reluctant to jump in. For all I know they are "re-leveling" and those 400k paydays are going away.

Yeah but they arent though. 350-400k is actually somewhat low for senior. They have been paying this for a long time. Its great money remote. I really dont understand the issue

Re: Golden Handcuffs

#45

Post by anonymousiam » Thu, May 13, 2021, 5:51 PM UTC

fullshark wrote: post #21

As a laborer, if I have a choice between a world where golden handcuffs exist and world where they don't, I choose the world where golden handcuffs exist. Presumably the idea is they will be forced to make work better to retain employees instead and it will a net win for workers, but there's zero details or explanation as to how exactly that will happen.

There are many different sorts of handcuffs. Mine was a lucrative defined benefit retirement plan. My (former) company eliminated the plan about 30 years ago, but grandfathered everyone who was still in the plan. About two years before I was eligible to retire (early), they changed things again and made it impossible to continue contributing to the plan. They offered a temporarily higher match to 401k contributions as compensation. (For the $200k I lost, I got about $20k back.) Eliminating further contributions meant I could no longer increase my retirement payout. Converting the annuity to lump sum (the obvious choice) meant that my lump sum payout would be reduced every day that I continued working there. The net effect was about a 12% reduction in pay. I took the early retirement as soon as allowed, and then took a job elsewhere for a 15% raise.

(The reason for the 12% reduction may not be obvious. When converting an annuity, they look at actuaries to estimate when I will die. The lump sum payout converts the annuity payments from the retirement date to the date of my death into one payment, distributed over five years. If I work longer, the time between my retirement and my death decreases. Thus the longer I work without retiring, the lower the payout.)

My golden handcuffs were changed into a golden kick in the arse.

Re: Golden Handcuffs

#46

Post by kemitche » Thu, May 13, 2021, 5:52 PM UTC

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…

Did Amazon return to back-weighted comp? The offer I received two years ago had comp that shifted from "cash focused" to RSUs over 4 years, and had equivalent cash value over the 4 years. Obviously, by year 3/4 when comp was mostly/all RSUs, the stock could have gone up or down significantly.

Given that the year 1 cash could be used to buy stock if I really wanted, it didn't seem an unreasonable approach to comp to me.

Re: Golden Handcuffs

#47

Post by codemac » Thu, May 13, 2021, 5:52 PM UTC

Huh? So now handcuffs with no gold?

This is much worse for start up employees - as grants each year allow for even more dilution, management hand wringing, and changed expectations. Do founders stock get magically taken away when they suck at being a CEO? When deadlines are missed? Generally they just get moved to the board.

The commitment you receive from your employees is HUGE. They show up 40+ hours a week, and bet their entire family and time on your company. Stop acting like somehow paying them even 0.1% as well as your founder is somehow a "bad marriage".

If they're pulling down the team, fire them. If you're afraid they're making too much money and may quit / retire - why are you in capitalism at all? Ownership is supposed to provide benefits.

The brazen attitude towards those that actually build your ivory tower is incredible.

Re: Golden Handcuffs

#48

Post by ericjang » Thu, May 13, 2021, 5:54 PM UTC

My general rule of thumb is that if the new comp arrangement isn't better in an obvious, predictable way, then it probably isn't better for the employee.

I think it would be good for Fred or Coinbase comp team to provide the expected payoff calculations for various kinds of employees under this new scheme - the hard numbers and probabilities (even optimistic ones) would be what convince me.

Re: Golden Handcuffs

#49

Post by jsjsbdkj » Thu, May 13, 2021, 5:55 PM UTC

seasoup wrote: post #9

This is a plan that is much worse for employees, being presented as if it were better. At least be honest about feeling like you are paying employees too much equity up front and want to pay them less.

Basically this lets the employer retain more of the upside in stock appreciation - your equity bonus is now recomputed every year at the current stock price, and presumably expressed in dollars (not shares). So they'll say "oh you're getting 50k this year in stock", when you got 40k last year, but meanwhile the share price has doubled and your 40k in equity _would_ be worth 80k if they had given you all 4 years up front.

They say it protects against downside, but odds are if the company isn't doing well they'll cut the dollar value of annual bonuses as well.

Re: Golden Handcuffs

#50

Post by johnthealy3 » Thu, May 13, 2021, 5:56 PM UTC

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…

Agreed that it's right to be suspicious of the motives of any venture capitalist that makes a post like this (nothing against Fred Wilson personally). One thing I noticed at my last few startups is that the initial option agreements tend to have less diligence around them, say a very small strike price and more favorable terms on stuff like acceleration. Naturally, later-stage VCs would seek to skew the terms more in their favor, and redoing option grants yearly allows this to happen.

On a more general note though, golden handcuffs can benefit the employee just because they are a guarantee. There's no possibility of future faking when it's up front and signed into a four year vesting schedule (e.g. "we'll give you a few percent next year but we need to get through this raise first").