3 ms·

Incentive alignment.

• danieltillett 11y ago
  Wouldn’t a high salary align interests too? Given how much people discount the future it should actually be cheaper. Interesting when I first started my business I paid well over the industry norms. I later tried moving to a model where employees (voluntarily) were able to trade in this high salary for a normal salary and a significant equity share (between 2% and 5% without vesting or a cliff). None of my employees wanted the trade. In the long run it worked out well for me, but I was surprised at the time.
  • stanleydrew 11y ago
    High salary doesn't align interests. If I'm the board of directors, I care about profit. I care about dividends on equity. If I'm an employee working for cash, I care about cash. Yes you can argue that smart employees will realize that revenue and ultimately profit leads to more available cash which leads to continued employment and salary, but that's an indirect effect. Of course you can also say that most employees don't understand equity or why they should care about it, so granting equity alone doesn't align incentives. Arguments can be made in both directions. I think it's an interesting debate actually. I've come down on the side of granting equity and encouraging employees to understand their grants so that (hopefully) incentives are more aligned than at the average company. An alternative way to get a similar result is to give a bonus based on company performance I think.
    • danieltillett 11y ago
      Yes I think bonuses are the better way to go too. They just need to be crystal clear in how they are awarded or else you will end with more bitching than effort.