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Palantir Buyback Plan Shows Need for New Silicon Valley Pay System

nytimes.com

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Re: Palantir Buyback Plan Shows Need for New Silicon Valley Pay System

#71

Post by ryporter »

bane wrote: post #9

This sounds like a company in big trouble and trying desperately to stem attrition and improve tanking morale. According to crunchbase they're basically owned by a private equity firm now (which is rarely a fun place to be) and are raising something like a billion dollars a year -- which basically appears to be around what their operating costs are (employee count of that year * $250k/yr). They're either not bringing…

They are not "basically owned" by a private equity firm. They have raised money at high valuations, and I strongly doubt that they have sold away a controlling stake in the company. So, they still get to make their own decisions.

They are definitely bringing in real revenue. Many firms have raised substantially more than they need to, because they have been well aware that funding could dry up.

Re: Palantir Buyback Plan Shows Need for New Silicon Valley Pay System

#72

Post by ryporter »

cbsmith wrote: post #48
argonaut wrote: post #23

Earlier quoted context omitted.

Given that the buyback price is above market price , I don't see a problem with this. Palantir is compensating you for signing a noncompete/NDA. If you don't want to sign those things, you are free to sell on the private markets for less than what Palantir offers you.

> you are free to sell on the private markets for less than what Palantir offers you Perhaps you are more aware of the terms on those shares than the rest of us, but generally you aren't quite "free" to sell the shares on the private market.

Many former employees have done exactly this.

Re: Palantir Buyback Plan Shows Need for New Silicon Valley Pay System

#73

Post by lmm »

rplst8 wrote: post #68
lmm wrote: post #57

Earlier quoted context omitted.

All of these things should be taxed as ordinary income. Companies shouldn't be able to do an end-run around taxation by giving you valuable stuff instead of giving you money directly.

> Companies shouldn't be able to do an end-run around taxation by giving you valuable stuff They already do in the form of health and retirement benefits.

Where I live health benefits are taxable. There are tax incentives for pensions (presumably intended to encourage saving?) which I guess I oppose too.

Re: Palantir Buyback Plan Shows Need for New Silicon Valley Pay System

#75

Post by abalone »

sverige wrote: post #6
birken wrote: post #2

Boy this article is a very friendly interpretation of Scott Kupor's blog post. From NYTimes: > He [Scott Kupor] also suggests a longer period for employees to exercise options after they leave, up to 10 years. That figure is endorsed by Y Combinator in an argument that any lesser period is unfair to employees. Makes it seem like Scott Kupor is on the leading edge of caring about employees, in agreement with YC (which…

Indeed it is. I particularly like the 'no longer contributing to the business' part, as if the work done by the original employees isn't what the current business was built on, at a discounted rate if their stock options are worthless. And as if the stock options were the only reason they're having trouble attracting quality talent. Stock options seem attractive as a form of compensation, since the hope is that you'r…

Kupor's mentality stems from dealing with co-founders who leave right after they complete their 4 year vest, well before IPO/acquisition.[1] While they certainly laid a foundation for the company, there's a lot of work still to be done to get to a liquidity event. Is it fair for them to leave with a huge stake and let the other co-founder(s) and employees figure it out? This is where he gets to phrases like "no longer contributing" or "wealth transfer". Essentially he's saying the vesting schedule doesn't capture everything an option should incentivize.

Having said that, I think he's over-applied this mentality to regular employees with much smaller stakes. It is reasonable to expect a founder to stay 10 years with a company. Not most employees.

[1] http://a16z.com/2015/10/19/prenups-for-co-founders/

Re: Palantir Buyback Plan Shows Need for New Silicon Valley Pay System

#76

Post by Mtinie »

coldcode wrote: post #74

Exercising options in a non-public company should not be taxed or valued in any way until the stock can be sold in a public market or to a purchasing entity. Of course what are the odds Congress would ever do that? Nil.

Can't this be mitigated to a large degree by setting the value per share to an tiny fraction of a dollar? Sure, you'll have a tax to pay when the shares are granted, but it should be reasonable.

I could get behind the scheme you commented with, but I'm unsure of generally why we have the system we currently do, so I would want to understand the rationale for the status quo.

Re: Palantir Buyback Plan Shows Need for New Silicon Valley Pay System

#77

Post by humanrebar »

rplst8 wrote: post #68
lmm wrote: post #57

Earlier quoted context omitted.

All of these things should be taxed as ordinary income. Companies shouldn't be able to do an end-run around taxation by giving you valuable stuff instead of giving you money directly.

> Companies shouldn't be able to do an end-run around taxation by giving you valuable stuff They already do in the form of health and retirement benefits.

And tying an individual's future (health insurance, retirement, immigration status) to an employer is a bad thing.

Re: Palantir Buyback Plan Shows Need for New Silicon Valley Pay System

#78

Post by chimeracoder »

humanrebar wrote: post #77
rplst8 wrote: post #68

Earlier quoted context omitted.

> Companies shouldn't be able to do an end-run around taxation by giving you valuable stuff They already do in the form of health and retirement benefits.

And tying an individual's future (health insurance, retirement, immigration status) to an employer is a bad thing.

> And tying an individual's future (health insurance, retirement, immigration status) to an employer is a bad thing.

Retirement isn't really 'tied to an employer', in that you can still open an IRA without an employer[0], or use a non-tax-advantaged account for retirement savings (most people outside the military or government service use non-tax-advantaged accounts for at least a portion of their retirement, since the IRA and 401(k) contribution limits are too low for most people to survive on during retirement).

This might have been different 50 years ago, where employer-driven pensions were more common, but today, the only real way your employer impacts your retirement is the 401(k).

The purpose of both the IRA and the 401(k) is to provide people with an extra incentive to plan for retirement. Putting away $450/month towards your retirement[1] can be unpleasant, but if you're getting, say, $90 that back (in the form of lower tax withholdings/taxes due), it makes it a bit easier, because that's effectively only $360 out-of-pocket.

The incentives work similarly for the 401(k), except the tax savings work out for the employer as well, meaning that they are incentivized to give you some portion of your compensation in the form of 401(k) matching (ie, they have an extra incentive to nudge you towards saving more of your own money for retirement).

Personally, I do believe that, if you do not have access to a 401(k) through an employer, your IRA contribution limit should be raised by $17,000 (which is the 401(k) contribution limit for individual contributions). But without employer contributions, at most that's saving you less than $6,000 - and that's if you're already at the very top marginal tax brackets (even making $100K gross in NYC, the most heavily taxed jurisdiction in the country, won't be taxed at 35%).

[0] Well, you can't contribute more than your total annual income to an IRA, but if you're making less than $450/month and living in the US, retirement planning is not your most immediate problem.

[1] ie, enough to max out your IRA contribution limit

Re: Palantir Buyback Plan Shows Need for New Silicon Valley Pay System

#79

Post by harryh »

gonehome wrote: post #19

Comments on this thread are not very interesting and generally off topic. This article points out an issue in SV which is that it's hard for employees to get value out of options held in companies that do not go public. One reason for this not mentioned in the article is that in the US the tax burden is extreme - partially because when it was implemented it expected companies to go public. If you hold options in a pr…

> Additionally when you sell the actual shares after you've exercised them you get taxed again on the sale.

This is a bit misleading. The same income isn't taxed twice. You'll only be taxes on additional gains that accrued since the time of exercise.

Re: Palantir Buyback Plan Shows Need for New Silicon Valley Pay System

#80

Post by harryh »

trungonnews wrote: post #38
jonathankoren wrote: post #34

Earlier quoted context omitted.

Yeah, the ISO spread with the AMT is bullshit that basically keeps the plebes in their place by not actually letting them get any windfall. However it seems like the real problem is exercising post-IPO. In the post-IPO world, you're dealing with say a 5x to 10x spread, possibly even more. In the pre-IPO world, your spread is probably 2x at most, which is much more manageable. One clarification with what you said, is…

What happen if the company goes bankrupt? What happen to the prepaid taxes on the ISO spread?

You get a credit that you can use to offset your taxes in future years.
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