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> which makes a sort of sense, given imperfect information and how risk is allocated This doesn't just make a sort of sense to me, it makes perfect sense. Peo
by vhiremath4 5y ago
> which makes a sort of sense, given imperfect information and how risk is allocated
This doesn't just make a sort of sense to me, it makes perfect sense.
People trade their labor at a lower rate for higher stability (less risk). The people who start companies, find capital, and distribute that capital in ways that increase the value of the company have taken on more risk (how significant varies case-by-case and usually is a natural market cap ceiling to the total value the owners can extract ahead of employees).
If the company I work at gives me shares in that company, I want the company to pay less for my labor (and everyone's) if my belief is that collectively all employees output will accelerate my own wealth creation when I sell my shares in the company. The share becomes a transitive store of value I believe my own labor alone will never be able to keep up with, and I want to make sure the value it's accumulating is not diminished because the company is paying out the full capital value of everyone's labor. Then there would be very little incentive for me to take the shares in the first place, and, honestly, very little incentive for anyone to start a company (why take on that risk if there's no payout in excess of just joining another company?).
- myroon5 5y agoFeels like many are stuck in this dichotomy between choosing stable rates or venturing out on your own where more middle ground should probably exist. Employee incentives should probably align more
- honorious 5y agoIsn't RSU the middle ground already? You can part of your compensation in salary, part in ownership of the company. If you work and the company does well, you do better. The % of comp in RSU raises as you get promoted to higher levels, where you (theoretically at least) actually have more impact on the success of the company.
- 6gvONxR4sf7o 5y agoIf my contributions increase the value of a $100M company by 10%, there's no way my RSUs' value is going to increase by $10M (unless I own 100% of the company). In a realistic scenario of $100k/yr of RSUs, even this near-impossible mythical single-person contribution of 10% would only net me $10k/yr. RSUs go a long way, but don't totally align the incentives.
- fragmede 5y agoThe value proposition is that RSUs goes up more than your 10% contribution, so using MSFT's stock price, $100k at the start of 2021 is worth some $150k by the end of it. Still not $10mm but better than $10k. The change in value is +$70k if you were at TSLA. This only works while the stock is going up though. If you were at FB, you'd be underwater so that $100k of RSUs is now only worth $80k, but at least RSUs mean you can still get $80k out of them if you had to liquidate (unlike options which have a strike price and can even be worth negative dollars, depending on your tax situation). At a company of, say, 100,000 employees, how much my individual contribution will makes the stock price go up is debatable, but getting more of those RSUs will materially boost my TC, where at upper levels the majority of TC is stock-based.
- deleted 5y ago[deleted]
- kqr 5y agoIt makes sense qualitatively, but the numbers no longer add up: https://cdn.statcdn.com/Infographic/images/normal/23410.jpeg https://cdn.statcdn.com/Infographic/images/normal/23410.jpeg Even considering the risk-neutral compensation, this is not how much employment ought to be discounted. Especially not in the U.S. where many states have at-will laws.
- heavyset_go 5y agoAll states are at-will states except for Montana in limited circumstances.
- lupire 5y agoThat is not a graph for software devs.
- kqr 5y agoWhat do you think it looks like for software developers?
- specialist 5y agoWhat about fairness? Bezos' risk of spending other people's money rewarded him with billions. Warehouse workers risk of personal injury are rewarded with starvation wages.