Amazon staff might get paid 50% less because shares have fallen so much

In the various companies I worked for, my stock options were always underwater, if I recall correctly.

That's the risk with stock options.

I also know several Amazon millionaires who got that way via stock options.

That's the reward with stock options.

Remember when Boeing stock tanked after the 737MAX crisis? The employees complained that Boeing management still got their performance bonuses - because the shareholders demanded that those bonuses be based on multi-year returns, not just short-term previous quarter results. The employees complained that their quarterly bonus disappeared - because the union demanded it be based on the previous quarterly results.

1. be careful what you ask for

2. accept with grace when you get what you asked for

Most FAANG comp is RSU, not options.

I admit to some envy when others I knew at other companies made bank with stock options while mine were underwater. I have my shortcomings, too.

The distinction is not meaningful in this context. Both are deferred compensation that's subject to gaining/losing value along with the underlying company valuation

No, options are more of a gamble. Stock values move up and down, but an RSU worth something today will likely be worth something tomorrow: even much-pilloried Meta stock is down "only" 50% from peak at this point. An underwater option, though, is completely worthless.

You could easily grant employees "in the money" options that have a lower risk profile, and similar characteristics as RSU. This is effectively what an RSU is anyway, an option with a strike price of 0 that vests+exercises at some point in the future. Not to mention most startup options are granted at 409A valuation, which in most cases is below actual market value.

No meaningful difference between the two for the context being discussed above. Different tax treatment. Believe whatever you want though

See angarg12's comment [1]. TLDR, Amazon comp is largely comprised of RSUs, negotiated, granted, and adjusted as if they were base comp. The comp structure is not the same as options you'd get from a startup (which are rightly considered largely worthless).

i.e., by Amazon's comp philosophy, this is effectively a pay cut for anyone whose comp was negotiated/adjusted during the pandemic. Management not adjusting for this is likely intentional belt-tightening which Amazon has seen a lot of lately.

"Amazon elects to lower comp bands in concert with drop in stock price" might be a better title.

[1] https://news.ycombinator.com/item?id=34889838

The distinction is super meaningful in this context.

- RSU compensation is used to prevent wage stickiness. It lets a firm pay really high wages when times are good and claw back that comp when times are bad.

- Stock options are a way to bait the gullible into working for low wages. Options cost non-hypergrowth companies nothing. As such, it doesn’t stop them from getting over the tips of their skis via labor costs. There is nothing to claw back / reduce.

So when the economy hits a snag, RSU heavy companies have a built in cost moderator whereas options based companies have to layoff.

RSUs cost the issuing company nothing from a cash perspective too. They simply create the stock out of thin air, diluting existing shareholders, e.g. stock based compensation expense.

While no affect on cash on hand, it does negatively impact GAAP earnings.

It's difficult to grant privately held equity that's taxable when it vests since you can't sell it to cover the taxes. Also if the company doesn't go anywhere, you paid a lot of taxes for nothing, and it can be difficult to even claim a loss if the company still limps along.

You cannot legally grant stock options in the US with an exercise price below the 409A price (private company) or grant date price (public company)

Grating RSUs results in fixed accounting for companies - stock-based comp expense doesn’t fluctuate with stock price unless there are features that result in variable accounting instead (which most companies avoid)