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From a strictly "expected value" calculation you are probably right that in many cases startups are getting a pretty good deal when they get employees to trade
by harryh 8y ago
From a strictly "expected value" calculation you are probably right that in many cases startups are getting a pretty good deal when they get employees to trade salary for stock options. It's hard to say if this qualifies as "taking advantage of these clueless employees" though.
Certainly it is in some cases, but in others the employees could have a high enough risk tolerance that it is a good deal for them.
In addition employees also often make career decisions on factors that are not purely financial. This is also a perfectly reasonable thing for people to do.
- hippich 8y agoFrom what I read typical stock option results in about 50k per year extra if company succeed. Chances of hitting that are really really small. So risk/reward doesn't seems to be right. As for non-financial reasons - this is 100% valid point. But then why we are talking about non-fair taxation? Stocks come into picture only when employee exercise (at a nominal price on the moment employee was hired) The same would apply if you use regular options for the publicly traded company on RobingHood for example.