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Ask HN: Are RSUs worth your loyalty?

• draw_down 7y ago
  Um, I think the benefit is that they can be traded for money after they vest.
• jiveturkey 7y ago
  An odd question. RSUs are part of TC, that's it. It is completely unrelated to job security. What has led you to think that there is a relationship?
  • mutaaf 7y ago
    There are a finite # of RSUs which management can distribute to high performers or valuable team members vested over a period of employment time. Here’s why I feel like job security is oddly related, why would the organization want you tied to them for that vesting period if they did not value you or your efforts or want you there for that period?
    • username90 7y ago
      Vesting period is meaningless, you get them as a part of a salary package. If I get shares vesting over 4 years then it just means that they are a part of my salary. If I leave after a year I didn't lose 3 years of shares, in the same way as I didn't lose 3 years of salary. The only time shares are different is stock growth, and since stock on average grows the shares will on average be worth more in year 4 than year 1. And in some rare cases with huge stock growth you can see extremely large compensations as a result, but otherwise they are just like normal salary.
      • screye 7y ago
        Exactly. Almost I just view the amount that vests every year as a part of my annual salary and that's it. The total is really immaterial.
    • tracer4201 7y ago
      I believe RSUs give your employer some friendly tax consequences. Aren’t they allowed to be written off? IMO people allocating RSUs are no safer than an engineer. They can easily get replaced. As a matter of fact, leadership can change directions at any time and now put you in a position where you’re miserable every day. I see the two have perhaps some correlation but because you’ve been given a decent grant doesn’t guarantee job security. Too many other factors involved.
      • klipt 7y ago
        > RSUs give your employer some friendly tax consequences. Aren’t they allowed to be written off? Is this in any way different from deducting normal salary from profits?
    • uxp100 7y ago
      Alternatively, RSUs are a way of giving you what feels a little like money now, but if they change their mind later they don't have to pay you. Why would they pay you at all if they did not value you? RSUs are worth less than equivalent cash, getting RSUs should signal less commitment than a cash bonus. To answer the original question, no, not worth loyalty, but no money is. You can think of them as a slightly complicated raise. That being said, over the past 10 years, RSUs have been very good for a lot of tech workers. They may or may not continue to be good.
    • mcfunk 7y ago
      It is true that if employers are offering RSUs selectively, the assumption would be that they would offer them to people they wanted to incentivize not to leave the company until after the vesting period at the earliest. However, it offers no guarantee at all that the company would continue to desire the employee's loyalty or that the loyalty goes in the other direction in the first place, since as mentioned the company loses nothing but the employee if the employee is fired or leaves before the vesting period completes.
    • jiveturkey 7y ago
      You've completely misunderstood vesting. It's not to keep you there for extra time. You can consider your base salary in terms of dollars per day, week, pay period, month, quarter, year, or FOUR YEARS. Any time span you like. Your RSU grant is simply scaled to four years instead of 1 year, or 1 month for that matter. The point of the RSUs vesting, instead of just being granted all at once, is that you are incentivized to put in a real effort. If your efforts help result in the company doing well, you get to share in the profit -- your $1 award today becomes $5 by the time it vests. The value of your RSU increased in direct correlation to the value that YOU ADD to the company. It gives you skin in the game and keeps people working hard. In fact, management is not incentivized to be stingy with some small "finite" number of RSUs. They are incentivized to hand them out liberally, giving everyone lots of reasons ($$$) to work hard hard hard.
  • deleted 7y ago
    [deleted]
• ThrustVectoring 7y ago
  RSUs are worth very slightly more than straight cash compensation due to the optionality. Your compensation will go up and down as the underlying stock moves, and you are allowed to switch jobs when the stock price moves downwards.
  • tanderson92 7y ago
    You still lost that money though, the optionality isn't worth anything because you gain nothing on the RSUs by switching jobs.
    • klipt 7y ago
      Depends how good you are at interviewing. You might get offered even more RSUs elsewhere.
    • liuyipei 7y ago
      I think what OP was trying to say was that fluctuations in RSU-valuation increases the extrinsic value of your option to switch jobs.
      • ThrustVectoring 7y ago
        Correct. I wouldn't use the term "extrinsic value", though, because it only explains what I'm thinking to people already exposed to real option analysis.
    • ThrustVectoring 7y ago
      That's not exactly what I'm saying, it's easier to discuss with an arbitrary example: suppose you get a job offer for $100k in cash and 1000 RSUs at a current stock price of $100. I'm saying that you should value this at slightly more than $200k/yr. Suppose after some time you start looking for jobs again, get another offer worth $215k/yr, and the stock price has done some movement. If the price is above $115/share, this would be a pay cut, so you decline the offer and state what it would take to get you on board. If it's below $115/share, you accept the job offer and get a pay raise. This is what I mean by "optionality" here. If your employer's stock does well, you get an automatic raise from staying put. If your employer's stock does poorly, you get a raise with effort from finding alternate employment. You are more exposed to upside than downside in your employer's stock - it's effectively a call option with a strike price equal to the difference between your current cash compensation and your best alternative to negotiated agreement.
• lnanek2 7y ago
  Aren't RSUs the opposite of job security? If you get fired or leave before they vest, you lose them. In the bay area they are often called golden handcuffs because developers halfway through their 4 year term often have another million in RSUs vesting, so can't go leave and work on their friend's awesome startups and the like, since the startups can't afford to match the compensation.
  • dominotw 7y ago
    > have another million in RSUs vesting I would gladly wear these handcuffs :D
    • LaserToy 7y ago
      Believe me, perspective changes once you are in them.
    • gigatexal 7y ago
      Depends on the actual numbers. They could be worthless or worth millions. Every funding round changes that.
      • alex_young 7y ago
        RSUs are for public companies.
        • seanhunter 7y ago
          They are more common at public companies, but a company doesn't need to be publicly traded to give people RSUs. Conversely, a public company can pay in options rather than RSUs (or both) if they want. Source: Work for a non publicly traded company and have RSUs not options, previously worked for a publicly-traded company that issued RSUs and options as part of comp
      • awinder 7y ago
        RSUs should be a lot more reality based, these are not options to purchase on a hypothetical future liquidity event, they're restricted stock that turns into real shares on public markets upon vesting.
• zaptheimpaler 7y ago
  RSUs are worth more than cash if you're optimistic about the stock and worth less if you're pessimistic. Over the last 10 years they've probably been worth a lot more than cash if you held on instead of selling, but no one knows about the next 10.
  • frank2 7y ago
    I disagree that RSUs can be worth significantly more than cash because the recipient of the cash can use the cash to buy (unrestricted) stock units if he or she is optimistic about the stock.
    • paxys 7y ago
      They can definitely be worth significantly more since RSU numbers are locked well in advance (1-4 years).
      • frank2 7y ago
        Oh, OK. Thanks.
      • notJim 7y ago
        This is the key. When I was interviewing, I had an offer of $150k + $20k stock, and another that was just straight $190k (these are fake numbers, but pretty close.) I told the first company about the $190k offer, and they matched it by upping the stock to $35k, and I took that offer. Then the stock nearly-doubled in value over the first year. Now it's worth mentioning that the stock could have also gone down, and frankly I am extremely skeptical of my own ability to predict this. So I wouldn't say I selected this offer based on the potential upside of the stock. But still, it's a nice upside.
    • nik_0_0 7y ago
      OP didn’t say significantly. The only reason I would agree with putting RSUs at a higher valuation is due to the vesting schedule - it often isn’t value now, but value in 2 years. So obviously “cash now” vs “stock now” is equal as you point out, but “this much cash in two years” vs “the value of this much stock now, in two years” would make most people lean towards RSUs in that scenario. (Of course no one would really offer the former straight up, but I suppose thats what bonuses are)
• JMTQp8lwXL 7y ago
  I view them more as golden handcuffs than security or loyalty. They factor into the opportunity cost of considering new opportunities external to your current employer. A new job will not only have to match your base, but give you an equal amount of stock, or an even larger base salary.
• dmak 7y ago
  How is the volatility nature of RSUs indicative of job security?
• al_chemist 7y ago
  "A restricted stock unit (RSU) is compensation issued by an employer to an employee in the form of company stock."
  • avionicsguy 7y ago
    @al_chemist Thank you! Between software frameworks and embedded systems engineering...oh hell just being in tech. in general there are way too many acronyms. Thank you for actually listing the definition! :-)
• didibus 7y ago
  RSU's aren't as good a deal as the equivalent worth in salary, but are a better deal than a lower salary, unless the company stock tanks. They allow the business to transfer some of the risk from them to you. Basically a kind of I'll pay you more if I can. Think of it as, I'll pay you X dollars now, and in 4 years, I'll pay you an additional Y dollars * how much I can afford, unless you no longer work here. Where "how much I can afford" is basically the stock price. It's better than the same salary without RSU. It's worse than a higher salary of equal worth. For anything in between, it depends on your risk tolerance and when you'll need the money.
• paxys 7y ago
  RSUs are the best feature of the tech industry for me. It is the ideal way to get employees invested in a company's success, and the best way to share that success with those who made it happen.
• bduerst 7y ago
  RSUs are golden handcuffs. You'll continually get a raise each year and a portion of that will be new RSUs that vest over the next four years. If you ever want to leave, that continually means leaving a substantial amount of money on the table. Thankfully some companies will give you a hiring bonus equal to your unvested RSUs though (edit: the big tech companies poaching from each other will sometimes do it, for those asking). As with all things labor related, RSUs are transactional. "Loyalty" shouldn't play into it because a large publicly traded corporation can only be so loyal to every one of it's employees.
  • maxwellg 7y ago
    > Thankfully some companies will give you a hiring bonus equal to your unvested RSUs though I've never head of this before. Seems like 2-3 years of RSUs could easily be over $1 million for someone later in their career. A $1 million signing bonus would be insane.
  • throw2773sgge 7y ago
    > Thankfully some companies will give you a hiring bonus equal to your unvested RSUs though Do you have any company names? Also, any numbers from your experience? I’d be quite happy to join pretty much anything for a 600K+ signing bonus.
    • nik_0_0 7y ago
      I’ve heard of companies matching the RSU 1:1, same value, same schedule. Not a sign on bonus though.
  • crmrc114 7y ago
    Oh it gets even better! If you work for a nicely performing stock like a FAANG you can encounter this gem: (Simple Round Numbers) 1. Get Base 100k + RSU 100k over 4 years 2. You work hard, company does better, yay! 3. Stock goes up RSUs now = 200k 4. I am sorry we cannot give you a raise because your total compensation = (Base+All RSUs) is over out allowable funding for your role. No raise for you! But keep up the good work! 5. Anytime yet get stock #3 happens... you get stuck with a low base and monopoly money. Try getting a bank to give you a loan with a huge RSU number... it can be done, but oh my god what a PITA.
• SamWhited 7y ago
  Money (or options, RSUs, or other potential gamble that you'll get money) are handcuffs, you can't be loyal to someone who has you in handcuffs, even very nice ones (unless they're the fun fuzzy kind maybe, but that's a different situation). Save your loyalty for a nice non-profit or co-op doing some good thing that you feel passionate about in your community, just give your employer your time until such a time as things change and you feel it's no longer worth it.
• apexkid 7y ago
  I disagree with anyone saying that RSU's are ideal way to get employees invested in a company's success. In practice, total compensation for an employee is decided by market value of that employee. If RSUs shoot up, you will get lesser base pay, if they go down you will end up getting higher base pay in next appraisal cycle. Your salary might be inflated or underflated (for lack of a better word) for a while but in long term the company will balance it out with market standards. If you think of RSUs as an investment, then its a different game. However, it is no different than owning stock on NASDAQ. You can get rich if you buy the right stock. Hence, my perspective. All cash better than RSU. If you wanna buy stocks then just buy from stock exchange of whichever company you want. Caveat: For startups where you get equity this argument doesn't hold true. There the startup might end up a unicorn and you make ton of money.
  • SubuSS 7y ago
    The problem being I can't think of a single company that offers an all cash deal even close to the FAANG offers (or pre-ipo offers in one of the unicorns). Even a bunch of giant companies like HBO/Samsung etc. got priced out for the same reason at least in a few cases I know.
    • myvoiceismypass 7y ago
      Netflix offers all cash comp (plus options, not the same)
      • tmarman 7y ago
        Came to say this. Of course, having NFLX RSUs over the last 10 yrs would be worth more than the salary increase, just saying.
• mabbo 7y ago
  You should think of RSUs no differently than you think of your paychecks. There is a scheduled date (every 2 weeks for my paycheck, every 6 months for my RSUs) where I will be given some <money> dollars if I am still working here. I will pay income tax on that income. One is in the form of money and the other is in the form of stocks, but really you should sell those stocks and buy something more stable and not tied to your employer. If you quit or get fired, you won't get your paychecks on the days you expected to in the future. Nor will you get your RSU vests. Same thing. Just bigger numbers and lower frequency for one of them, with some additional variability in amounts. They aren't golden handcuffs. They aren't job security or threats. They're just pay to keep you working, like anything else. edit: I lost a word or two.
  • ryaan_anthony 7y ago
    Or if the company is sold before you vest, the new management can decide not to honor your RSUs. It happened to me!
    • crmrc114 7y ago
      Holy crap that would suck, how many staff did they loose when they decided to screw with peoples pay like that? I would think, as a company, you would just be shooting yourself in the foot unless you did something like increased base-pay to cover the loss of RSUs.
    • lonelappde 7y ago
      This is why legitimate companies vest quarterly or more frequently. Your 0.01% equity stake is does not make you a powerful investor.
    • mabbo 7y ago
      You're company decided to give you a pay cut. They wrapped that present around reasons like a buy out, but that's what they did. Who cares if it's your new management or old management, it's your employer and that was what they chose to do. It's no different than if they said hey, we're going to pay you less money every paycheck, because <reasons>. All you can do is ask if your remaining pay is worth the work you do.
• matmann2001 7y ago
  RSUs are a decent way of aligning company success with employee success. But there's plenty of pitfalls with RSUs too. 1) From an investment risk perspective, your personal livelihood is already significantly tied to the company because you rely on the company for a salary. Holding a significant chunk (relative to your total investments) of stock in your company as well adds to that risk. 2) Unless you're a C-suite exec, your actions will likely have no direct impact on the stock price. And obviously, insider trading is illegal. That means holding your own company's stock has no fundamental advantage over holding stock of a company you don't work for. If that's the case, you're better off picking stocks based on actual performance and eliminate the personal bias. 3) You can sell your RSUs once they vest in order to diversify, but you have to wait a year after vesting or short term gains tax will apply to any gains post-vesting. So, it might be advantageous to wait a year if you don't plan to sell immediately upon vesting. Also, with some companies, a portion of your shares will be surrendered back to the company to cover income tax on the shares. 4) From a tax filing perspective, RSUs and ESPPs can be a PITA. In my experience, tax software and general tax filing services often don't know how to correctly record the cost basis, which means you end up getting taxed twice if you don't know what you're doing. 5) When cash is tight, companies might lean more heavily on RSU-based compensation if they can't afford raises or cash bonuses. You need to make sure your company is giving you what you need. 6) The golden handcuff effect. You want to leave for a better job, but you've got a nice chunk of RSUs that haven't vested yet and could be worth quite a bit in just a couple more years. Is that new job worth the opportunity cost of giving up those shares? For companies that award RSUs as part of yearly performance reviews, you're pretty much always going to have some RSUs that are 3 years out from vesting. It's just difficult weighing the potential value of RSUs vs a new job's salary/benefits and whatever reasons you wanted to jump ship in the first place. It's very personal math and ultimately you have to determine an answer for yourself.
  • mcfunk 7y ago
    nicely explained!
  • alex_young 7y ago
    > 3) You can sell your RSUs once they vest in order to diversify, but you have to wait a year after vesting or short term gains tax will apply. This is incorrect. RSUs, once vested, are taxed as income, and any gains or losses from the day they vest are treated as any other stock would be from that day on. There is no tax benefit in holding on to them rather than selling and diversifying. This detail makes RSUs equivalent to income from an employee's perspective, and offers no incentive alignment post vesting IMHO.
• makecheck 7y ago
  I treat them as being worth $0, as an unexpected bonus. In other words, determine what you can “afford” (rent, etc.) based on NOT seeing a penny from an RSU. There is no way to be exactly sure what they will be worth. Stock prices not only go up and down but the “long term” (lower tax) date to sell them is even further away. Even well-known companies see major shifts in stock value. RSUs are also a different “class” of stock typically, meaning that in the event of a catastrophe your shares are not at the top of the list. Company goes under? More important investors get their payouts first, your shares may be worth literally zero. Less if you believe in lost opportunity costs, etc.
  • Kirby64 7y ago
    At a publicly traded company, RSUs are definitely not worth $0 and shouldn't be treated as such. I agree you shouldn't base their value at some arbitrary inflated number and should live within your means, but if you truly think RSUs are worth $0, then you also think the company is going to go under (or you get fired) before they vest. I typically value them at some percentage of the current value of the stock (less than 100%) depending on the company. For most signing bonus RSUs you're getting some of them after a year anyways. That's not a long time to wait, so risk/opportunity cost is low. At a startup or some privately traded company, yeah sure. Their value is effectively $0.
• sys_64738 7y ago
  You'll know your worth to the company by how little they give you for RSUs.
• agentofoblivion 7y ago
  I have one of the happier cases perhaps. At time of hire, my target comp was around $160k, RSUs were backloaded to mainly vest in years 3 and 4. I’m now in those years, and stock has risen a lot. Now I’m making more like $230k. Sure, they used that once to not give me a big raise, but I got promoted once with a 25% raise and it’s hard to complain when I’m bringing home far more than I would have thought. So RSUs can be good.
• deleted 7y ago
  [deleted]
• deepaksurti 7y ago
  Your loyalty is to doing your job to the best of your ability and trying to improve as much as is realistic, assuming all other things being equal by which I summarily mean you don't work in a toxic place. As for RSU's, as others have mentioned, it is great to think of it as additional money and base everything on your base pay (pun unitended). Never sign up for a job where your base pay may vary based on RSU grants, I am surprised to read something to that effect on this thread. As for job security, I don't think it is a function of your role, salary base pay or stock grants. It is a function of market dynamics and how your company is doing well in the space it operates in, so it is our job to keep an eye on that. If you see winds of change that may hurt you, one better ensure not getting caught in the crossfire. So I think it is better to be loyal to your own career and the good side effect of that is being loyal to your role and hence your current employer!
• 30Hayekliam 7y ago
  hack shiwo