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This is horrific for employees. Ben Kuhn already nailed the math here[1]. The optionality embedded in long-dated grants is a huge fraction of total comp at high

This is horrific for employees. Ben Kuhn already nailed the math here[1]. The optionality embedded in long-dated grants is a huge fraction of total comp at high-growth companies and represent almost the entire right tail of outcomes. It also requires assumptions about the future, which is why companies generally abstain from quantifying what it's worth. It seems like the companies doing this are trying to arb that uncertainty by retaining all of the potential gain for themselves in exchange for a slightly larger nominal income. Don't do it. [1] https://www.benkuhn.net/optopt/ https://www.benkuhn.net/optopt/

analyst74 5y ago
This is no different from how Amazon does targeted compensation, where rising stock price means you get less/no refresher and raises, or all-cash comp at Netflix. It's catering to more risk-averse candidate pool.
- valdiorn 5y ago
  Having worked somewhere where I had a large deferred bonus, which I had to walk away from after the company turned hostile very quickly, I'd much, MUCH prefer to get my bonus paid out at the end of each year, vs. having it deferred, even if I have to take a hit on overall comp instead. You just can't estimate how compatible you and your employer will be 4 years in the future.
  - patrickmn 5y ago
    never even heard of that kind of bonus. it sounds like it's designed to work exactly this way.
- lumost 5y ago
  Amazon does targeted comp 2 years in the future. While in theory the company may act to make people whole in a given year. This will practically occur via dive and saves or truly exceptional circumstances such as the stock suddenly dropping 2-4x and new hire grants effectively becoming non-competitive.
calderwoodra 5y ago
Did I read Ben Kuhn's article right? For engineers at almost every level (except maybe right out of school), they can easily make 100k/yr more by choosing a big co. So if money is all you're optimizing for, it's never worth it to choose a startup unless you're very risk adverse.
- hansvm 5y ago
  I don't think that's the right takeaway. There were a ton of assumptions going into that +$100k cutoff, including that the initial exercise price for your bag of options would be less than the fair market value for a new grad's initial stock grant at FAANG. The emphasis of the article wasn't a particular number, but that startup options can be a little more valuable than they look, so it might be worth actually doing the math on some of the better offers rather than blindly going to FAANG.

analyst74 5y ago

This is no different from how Amazon does targeted compensation, where rising stock price means you get less/no refresher and raises, or all-cash comp at Netflix. It's catering to more risk-averse candidate pool.

valdiorn 5y ago
Having worked somewhere where I had a large deferred bonus, which I had to walk away from after the company turned hostile very quickly, I'd much, MUCH prefer to get my bonus paid out at the end of each year, vs. having it deferred, even if I have to take a hit on overall comp instead. You just can't estimate how compatible you and your employer will be 4 years in the future.
- patrickmn 5y ago
  never even heard of that kind of bonus. it sounds like it's designed to work exactly this way.
lumost 5y ago
Amazon does targeted comp 2 years in the future. While in theory the company may act to make people whole in a given year. This will practically occur via dive and saves or truly exceptional circumstances such as the stock suddenly dropping 2-4x and new hire grants effectively becoming non-competitive.

calderwoodra 5y ago

Did I read Ben Kuhn's article right? For engineers at almost every level (except maybe right out of school), they can easily make 100k/yr more by choosing a big co. So if money is all you're optimizing for, it's never worth it to choose a startup unless you're very risk adverse.

hansvm 5y ago
I don't think that's the right takeaway. There were a ton of assumptions going into that +$100k cutoff, including that the initial exercise price for your bag of options would be less than the fair market value for a new grad's initial stock grant at FAANG. The emphasis of the article wasn't a particular number, but that startup options can be a little more valuable than they look, so it might be worth actually doing the math on some of the better offers rather than blindly going to FAANG.