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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

#71

Post by gpderetta »

twblalock wrote: post #58
gpderetta wrote: post #49

Earlier quoted context omitted.

But as long as the cash bonus has the same nominal value as the stock grant there is not much of a downside for the employee as in the worst case they can just buy the stock on the market (which should be possible for a large tech company).

From experience, that's not true. A bonus of $N is worth $N. A stock grant of $N has turned out to be worth $2.5*N or even more, by the time it finishes vesting. Could it have gone the other way? Of course, and it's often likely that at startups stock could be worth zero. But at large companies, even with the recent dips in stock prices, employees who joined 2+ years ago are better off with stock grants than they wou…

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.

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

#72

Post by modeless »

spaceywilly wrote: post #61
kodah wrote: post #50

Earlier quoted context omitted.

This is how my ESPP works. I couldn't imagine that program replacing my RSUs. What a ripoff to the people attracted by the promise of RSUs. As someone who came into tech with $0 in savings, RSUs are what gave me financial freedom. When a business dilutes that they not only dilute the marginal amount of business that employees get back in return for their contributions but it also takes away another key financial util…

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 and try again at a different company, you're not locked in.

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

#73

Post by ericmay »

twblalock wrote: post #44
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…

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…

If they all wink wink do it at the same time then it doesn’t matter.

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

#74

Post by UncleMeat »

bumby wrote: post #26
bushbaba wrote: post #5

Earlier quoted context omitted.

This is the same as statistically from loading a 401k out performs DCA throughout the year. Sure this year sucks, but if only 1-2 years out of 8 perform worse, BUT 6-7 years you perform better. Then holistically you’re still better off. When you invest look at the long term not short term.

Isn't this dependent on timing and isn't part of the point of DCA to mitigate timing risks? E.g., If I loaded my 401k just before the bottom fell out of the market, you need a much higher proportion of good years to dig out from that hole. With DCA, you would have a shallower hole to climb out of. (Possible I misinterpreting what you meant, or that I am just not financially saavy enough to chime in)

But on average the market goes up. You can lose with lump sum investment as early as possible. But you will be more likely to lose by waiting and only slowly purchasing in. The value of DCA is in emotional regulation since it softens swings at the cost of reduced expected value.

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

#75

Post by JAlexoid »

ryanisnan wrote: post #41
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…

If I'm an employee earning equity vs cash, I damn well want to make sure my incentives are aligned with the companies, e.g. the value increasing. This seems a bit perverse.

The best way to increase stock value in short/mid term - cut costs... (aka your salary/position)

Your incentives never align with any of the publicly traded major tech companies.

Small startups - yes, you have more leeway. Google, Facebook, Apple - yeah, no... outside of top management, your fixes to their mapping application have sweet all to do with stock value.

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

#76

Post by nahname »

modeless wrote: post #37
tensor wrote: post #28

One crucial thing not often talked about with this plan is that the stock is granted and vests quarterly . In fact, the amount of stock you get each quarter is also variable. E.g. if you choose to have 100k of equity each year, each quarter you get whatever amount of units equates to 25k of stock. So what they've done is nearly completely untie compensation from the stock price. You neither benefit significantly nor…

So it's not an equity grant at all then. It's an employee stock purchase plan. You choose how much of your compensation buys stock and you get a small discount on the purchase price (called "bonus" in the article). That is exactly an ESPP.

An ESPP is directing earned cash into stock. You buy the stock at time of payment.

This is directing equity into RSUs or ISOs at the open of the window. You will be subject to price fluctuations over the window, which you wouldn't be with an ESPP.

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

#77

Post by pxx »

MikeTheRocker wrote: post #60
kodah wrote: post #50

Earlier quoted context omitted.

This is how my ESPP works. I couldn't imagine that program replacing my RSUs. What a ripoff to the people attracted by the promise of RSUs. As someone who came into tech with $0 in savings, RSUs are what gave me financial freedom. When a business dilutes that they not only dilute the marginal amount of business that employees get back in return for their contributions but it also takes away another key financial util…

I don't understand how it could be preferable to be paid in public equity you could otherwise buy with cash

You get a small free option if job change costs are zero. Unvested equity can appreciate. The option is only really free if you can change jobs effortlessly if it depreciates, but that's close enough to true if you're motivated enough.

Note that this is still catastrophic in terms of diversification. And you can compare job change costs directly to how much paying for this option would cost.

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

#78

Post by BMorearty »

neon_electro wrote: post #59
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…

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?

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

#79

Post by taxman22 »

spaceywilly wrote: post #61
kodah wrote: post #50

Earlier quoted context omitted.

This is how my ESPP works. I couldn't imagine that program replacing my RSUs. What a ripoff to the people attracted by the promise of RSUs. As someone who came into tech with $0 in savings, RSUs are what gave me financial freedom. When a business dilutes that they not only dilute the marginal amount of business that employees get back in return for their contributions but it also takes away another key financial util…

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?

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”

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

#80

Post by marcinzm »

spaceywilly wrote: post #61
kodah wrote: post #50

Earlier quoted context omitted.

This is how my ESPP works. I couldn't imagine that program replacing my RSUs. What a ripoff to the people attracted by the promise of RSUs. As someone who came into tech with $0 in savings, RSUs are what gave me financial freedom. When a business dilutes that they not only dilute the marginal amount of business that employees get back in return for their contributions but it also takes away another key financial util…

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?

I'll given an example.

If you had $200k in yearly cash compensation from Apple starting in 2019 then you'd make $200k this year.

If you had $200k in yearly RSU compensation from Apple starting in 2019 then you'd make $800k this year.

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