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Also: "Lyft's other cost-cutting measures include furloughing 288 employees and base pay reductions of 30% for executive leadership, 20% for VPs, and 10% for al
by sna1l 6y ago
Also: "Lyft's other cost-cutting measures include furloughing 288 employees and base pay reductions of 30% for executive leadership, 20% for VPs, and 10% for all other exempt employees. Board directors will give up 30% of their cash compensation during Q2."
- user5994461 6y ago>>> base pay reductions of 30% for executive leadership Aren't executives mostly paid in stock and bonus?
- CydeWeys 6y agoAnd the value of those is probably going down by more than 30%, seeing as how they're shares, and often linked to stock performance as well.
- dodobirdlord 6y agoPaying people in stock and performance bonuses is ideal during a downturn. It doesn't cost the company anything to pay people in stock, since it just siphons off value from all existing stock, and nobody's getting their performance bonus!
- MiroF 6y ago> anything to pay people in stock, since it just siphons off value from all existing stock wait what?
- edmundsauto 6y agoIt doesn't cost cash, I think they meant.
- MiroF 6y agoYeah, sorry it was unclear but I was more confused by the "siphoning" value part.
- edmundsauto 6y ago"Dilutes" stock value (per share) would possibly be more accurate? Keep throwing shares at execs; if the company is successfully, it's a dilution. If it fails, then at least they didn't waste real money.
- zifnab06 6y agoLet’s say I have 1000 outstanding shares all worth $10. I need to pay someone a $5000 bonus. I’ll just issue 500 shares of stock to them instead because, well, that’s about $5000. Hypothetically the per share price goes down by 1/3 here and is now worth $6.67 (but the company’s still worth $10,000 total it’s just 1500 * $6.67 instead of $1000 * $10). Generally though bonuses like this come out of a pool that’s already been allocated years ago and there’s no change to stock price
- richardwhiuk 6y agoEven if the pool is allocated years ago, it's still effectively dilution (as before shareholders effectively owned a fraction of the unallocated sharepool).
- three_seagrass 6y agoCreating new shares dilutes the existing share value. Paying employees in shares means you're diluting the stock value every time. Of course, for most publicly traded companies there are so many outstanding shares that this is negligible.
- MiroF 6y agoI thought most executive compensation was paid out of pre-allocated shares.
- three_seagrass 6y agoMost employees are not executives.
- MiroF 6y agoIf you scroll up, the question was "Aren't executives mostly paid in stock and bonus?"
- formercoder 6y agoThere really is a cost to paying people in stock. That's why SBC is on the income statement. Additionally, analysts will often not add SBC back to cash flows.
- trimbo 6y agoWith GAAP reporting, stock comp goes on the income statement and affects the bottom line. So it has a visible effect for investors, but no one cares about P/E anymore so...
- vecter 6y agoCan someone explain to me how stock comp costs the company money, if it does? AFAICT it just creates equity dilution, but I might be missing something.
- njoubert 6y agoThere are two ways to compensate with stock: purchasing stock on the open market with cash, or, hand out stock from a pool of withheld shares. The pool of shares might be periodically increased through creating new shares (and diluting) but this must be reported to the SEC and is only done infrequently. GAAP reporting requires that stock compensation is written off as an expense. It does not reduce the company’s cash, but it does reduce the company’s earnings. Hence it changes the price to earnings figure.
- vecter 6y ago> It does not reduce the company’s cash, but it does reduce the company’s earnings. If it doesn't cost the company any money, why is it defined to affect the company's earnings?
- samfisher83 6y agoIts from Accounting assets = liabilities + equity. So equity = a-l. If you pay cash your assets go down so your equity goes down. If you give away equity your equity goes down. In either case you equity goes down.
- klodolph 6y agoThe amount of stock may be based on a much higher valuation at this point.
- jessriedel 6y agoAren't bonuses usually tied to base pay?