4 ms·
That's the main reason I like traditional options/equity, it makes me feel like I own part of the company (no matter how delusional or small of a share that may
by ry0ohki 15y ago
That's the main reason I like traditional options/equity, it makes me feel like I own part of the company (no matter how delusional or small of a share that may be), so sure I get paid for 40 hours of work, but if I work 60 hours and don't get overtime, it's not terrible because I'm helping the company I own part of.
37sigs has implemented essentially a non-performance based bonus (which is also what they call it), which kind of defeats the point of equity/options at all in my opinion. An interesting question would be, if 37sigs does take any more investment in the future, and this pool stays the same, it does seem to have the advantage of not being diluted?
- fragsworth 15y agoThe employees want the sale price of the company to be higher so their portion of the 5% pool will be higher. As far as incentives go, it's not much different from equity/options.
- bhickey 15y agoThere are the tax implications. This scheme will be ordinary income and subject to FICA and income tax rather than being taxed as capital gains. By being clever they're screwing their employees out of a lot of money. Employees also can't make an 83(b) election on a bonus.
- Daniel_Newby 15y agoEquity encourages employees to build long-term value even if they plan on leaving the company, and act favorably to the company after leaving. A buyout lottery for current employees hurts morale and encourages people to hang on to the job for the sake of hanging on (and royally screws them tax wise). Mainly this is an argument against ever using an LLC for a long-lived business. LLCs should be reserved for personal shell companies and companies that will be wound down at a fixed time. If this had been an S corp or C corp, they could have simply adapted an off the shelf stock option agreement.