Open guide to equity compensation

Posted by mooreds 6 days ago

Open guide to equity compensation(github.com)

652 points | 298 commentspage 2

sprocklebud 6 days ago|

I got hit with a new equity compensation fugazi with RSUs at a small public company recently.

My offer letter pledged something like $100,000 of stock, vesting over four years. I was told that I would receive the grant within the first three months of my employment, once it was approved by the board.

Once I finally received the grant, it was 1/5 of what it should have been. “What gives?”, I inquired.

Apparently the stock incentive plan has a “price floor” for grants at $5 / share, and the stock had plunged to approximately $1 / share at my time of hire.

So my offer letter says my grant is for $100k, but in reality it’s $20k.

I learned this was because there was a limited pool of stock available for employee award grants, and a recent rout in the stock price meant there was an insufficient amount of stock available for grants.

Apparently going forward, offer letters specify the number of RSUs rather than a $ amount. So I guess a charitable interpretation is that it may not have been so much an intentional deception as a set of unfortunate circumstances coming together with some poor oversight on the details of my offer letter.

Still, I am incensed.

I referred to a previous employer’s offer letter and RSU grant for comparison. The offer letter also specified a $ amount, and did not specify how it would determine the price of the stock to calculate the awards by.

In that case, it seemed to be the average closing price of the stock in the month the award was granted. Which I’m content with, but these details also were not specified in the offer letter.

tldr if you get an offer letter for a $ amount of RSUs, make sure to clarify (in writing) how the valuation of the stock is determined for the calculation of the number of units awarded.

pyfon 6 days ago||

Oh that is bad! It is a 20k/y pay cut you weren't expecting.

If they were keen to make amends they should just bump your pay that much. Unless they are struggling.

By the way I have a similar RSU amount and schedule. So gar so good but cognizant that in the contract they can stop it at any time. I took the risk as I can also quit at any time!

pm90 6 days ago|||

This is strange and possibly illegal. If the stock falls, you should get more stock since they’re worth less. If they don’t have enough stock then they shouldn’t have offered you that as compensation.

In any case… $1- $5 is penny stock territory. I believe you get delisted from NYSE if ur stock stays at $1 for too long.

marcusb 6 days ago||

All of the RSU offers I ever got stipulated the grant was "subject to the approval of the board", i.e., not guaranteed. That said, I'd be absolutely livid if something like this happened, and would be expecting my manager to either make it right, or I'd look for a new job at the first available opportunity.

You can't do good business with bad people.

OptionOfT 6 days ago||

I got offered .3% as a first developer at a company. That's just insane.

No benefits, $45k pay cut, and even when everything goes well I might break even.

marssaxman 5 days ago||

Were they people you'd like to work with on a project you'd like to help build? Maybe it's worth it. Life is for living, after all, and we do a lot of our living at our jobs; there's more to consider than just what you get paid.

callc 5 days ago|||

I would not want to work so closely with someone trying their hardest to minimize the benefit to me. Since life is for living, we should work on teams where there is genuine respect for all members, not animosity and greed.

The sad fact is that being able to work just for personal satisfaction and not just for money is an extremely privileged position.

jjk7 5 days ago|||

Until they get rich off your labor and you get bitter about it.

paulcole 5 days ago||

Isn't it just insane from your point of view. For somebody else couldn't the same offer be appealing?

kccqzy 6 days ago||

My personal preference only: I'm glad my current employer has no equity compensation altogether; just base salary and bonus. My former employer did have RSUs, but they have an auto-sell program that I utilized every year.

In college the computer science department had an extracurricular talk about finances for a software engineer; the invited speaker was very adamant that holding most of your net worth in a company that employs you was an unacceptable concentration risk. I remembered that to this day.

doktorhladnjak 6 days ago|

A lot of employers who only pay cash have salaries similar to companies that pay cash salary plus equity. Perhaps the equity won't be worth anything, but often times it's extra on top of what's being offered. Those accepting cash only are often leaving potential expected value on the table.

kccqzy 5 days ago||

Not true at all in my experience. Employers who do not give equities tend to pay much more generous bonuses.

shelled 5 days ago||

Is there a way to find out current average/going price of shares (I have ESOPs; I have not yet exercised and was laid of sometimes ago) of an unlisted US company? I would also not like the company to find out (if possible).

Can I even sell in secondary market? I do not live in USA. Can the company stop me from selling and also refuse to buy it back themselves?

Fruitmaniac 5 days ago||

I've earned stock options from three startups and none of them ever went public. The only company that ever actually paid me equity was Amazon and it was a pretty big payout. You will earn a lot more with RSUs than options.

maxehmookau 5 days ago||

A guide for non-US employees at US companies that offer equity would be super helpful. It's an absolute minefield, especially in Britain. I'd love to contribute that information to your guide if contributions would be considered?

neallindsay 5 days ago||

This doesn't even mention ESOPs[1], which have very favorable tax benefits in the US. I don't think that ESOPs are very compatible with high-risk/high-reward startups, but for businesses that turn a profit and grow at a sustainable rate, they are excellent.

[1]: https://en.wikipedia.org/wiki/Employee_Stock_Ownership_Plan

jlundberg 6 days ago|

Any suggestions on the topic relevant for other countries than the US?

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