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Open guide to equity compensation

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656 points mooreds | 1 comments | 13 Apr 25 19:13 UTC | HN request time: 0.001s | source
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retiredpapaya ◴[13 Apr 25 23:26 UTC] No.43676621[source]▶
The Netflix approach to this [1], where Netflix allows employees to choose how much of their compensation is cash vs options seems like the best approach - you can tune based on your risk tolerance.

> Each employee chooses each year how much of their compensation they want in salary versus stock options. You can choose all cash, all options, or whatever combination suits you. You choose how much risk and upside (down) you want. These 10-year stock options are fully-vested and you keep them even if you leave Netflix.

[1]: https://jobs.netflix.com/work-life-philosophy

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jjeaff ◴[14 Apr 25 03:28 UTC] No.43677812[source]▶
Is there some bonus given if you choose stock options? Otherwise, what would be the incentive of taking options over cash in any amount?
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n2d4 ◴[14 Apr 25 05:00 UTC] No.43678205[source]▶
An understated benefit is that, if you have 4 year vesting, you can choose after year 1 or year 2 whether you want to stay.

Meaning, if the company's stock went up 2x after year 1, your salary has effectively doubled for years 2-4. If the stock went down -50% however, you just leave and get market salary somewhere else.

So, considering this, the expected value of $100 in stock options is actually more than $100.

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hiatus ◴[14 Apr 25 14:43 UTC] No.43681862[source]▶
> Meaning, if the company's stock went up 2x after year 1, your salary has effectively doubled for years 2-4. If the stock went down -50% however, you just leave and get market salary somewhere else.

If you get 25k shares worth <$1.00 and, you won't double your salary even if the share price doubles. Not to mention that only 1/4 would be able to be exercised, and you have no liquidity to realize the gain.

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1. n2d4 ◴[14 Apr 25 15:33 UTC] No.43682442[source]▶
The assumption in my comment is that your entire salary is in stock — otherwise, obviously you need to adjust accordingly. But only 1/4th of the stock being exercisable makes sense if you think of vesting like a monthly salary — each month, another 1/48th becomes exercisable. Even if you technically own the rest as well, it's more appropriate to think that you don't.