4 ms·

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, a

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.
  - tanderson92 7y ago
    Got it, thanks.
ozten 7y ago
RSUs are worth more due to tax implications? I'd rather have a dollar now versus the equivalence of a dollar in a stock which is unavailable for up to 4 years... Even if your companies stock is out performing the market, I'd rather have a dollar now to buy company stock and keep my mobility. Employees need to be careful to diversify their portfolio. A dollar today can be put in any type of investment, whereas RSUs can lead to folks having too much of their egg nest in one basket.
- awillen 7y ago
  Sounds like the original comment was referring to RSUs in public companies. If you sell those immediately upon receiving them, they're basically equivalent to cash.
- goobynight 7y ago
  RSUs are as good or better than cash as long as you can keep a job for the length of the cliff. That's typically just a year... The 4th year of an RSU grant is just as unavailable as my base salary 4 years away.
  - ozten 7y ago
    Good point, I wasn't thinking clearly about base salary 4 years away.
- tmarman 7y ago
  ... except the choice is not a dollar now vs. a dollar of stock in 4 years. RSUs are calculated as part of your total annual compensation the same was as salary. A grant of $100k RSUs that vest over 4 yrs would be more the equivalent of $25k more in salary, not $100k bonus. Yes, there's the diversification problem but it's not like you have that same money upfront to invest in anything you want.
- ThrustVectoring 7y ago
  An RSU grant from a publicly-traded company is equivalent to a cash bonus that is tied to the current stock price of the company.

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.
- tanderson92 7y ago
  Got it, thanks.

ozten 7y ago

RSUs are worth more due to tax implications? I'd rather have a dollar now versus the equivalence of a dollar in a stock which is unavailable for up to 4 years... Even if your companies stock is out performing the market, I'd rather have a dollar now to buy company stock and keep my mobility. Employees need to be careful to diversify their portfolio. A dollar today can be put in any type of investment, whereas RSUs can lead to folks having too much of their egg nest in one basket.

awillen 7y ago
Sounds like the original comment was referring to RSUs in public companies. If you sell those immediately upon receiving them, they're basically equivalent to cash.
goobynight 7y ago
RSUs are as good or better than cash as long as you can keep a job for the length of the cliff. That's typically just a year... The 4th year of an RSU grant is just as unavailable as my base salary 4 years away.
- ozten 7y ago
  Good point, I wasn't thinking clearly about base salary 4 years away.
tmarman 7y ago
... except the choice is not a dollar now vs. a dollar of stock in 4 years. RSUs are calculated as part of your total annual compensation the same was as salary. A grant of $100k RSUs that vest over 4 yrs would be more the equivalent of $25k more in salary, not $100k bonus. Yes, there's the diversification problem but it's not like you have that same money upfront to invest in anything you want.
ThrustVectoring 7y ago
An RSU grant from a publicly-traded company is equivalent to a cash bonus that is tied to the current stock price of the company.