5 ms·

If you have RSUs worth 200k per year, standard practice is that you get one grant of 800k at the start of employment, vesting over four years. If you got 200k c

If you have RSUs worth 200k per year, standard practice is that you get one grant of 800k at the start of employment, vesting over four years. If you got 200k cash instead, you couldn't buy 800k stock in the first year. That's an extra 600k of upside exposure. If that 600k of extra stock appreciates a lot in the first few years, you are far better off with the RSU grant. If it doesn't, you can quit before it vests and try again at a different company, you're not locked in.

ulfw 4y ago
I don't know a single tech stock that has (significantly) appreciated over the last 12 months. I know a ton that depreciated by 2/3rds.
- sokoloff 4y ago
  Which leaves the employee with less upside going forward, at which point they can switch companies and "start over" with an RSU grant that is at par. In this regard the initial grant has a bit of flavor of an option. You have the option to stay on the vesting schedule or change companies and start a new vesting schedule, but any losses on unvested amounts don't hit you if you switch.
  - paulmd 4y ago
    incentivizing productive employees (the ones with the most alternatives) to quit if the stock price (or the stock market generally) goes down is a hell of a side-effect when you put it like that. I guess that's the monkey-paw side of "incentivizing the employees to make the company perform by giving them a stake in the upside"...
    - sokoloff 4y ago
      That’s why a lot of companies will issue special grants to their highest performing/most critical employees if the shares drop a lot. That makes for a good “double dipping” if the shares recover.
      - marssaxman 4y ago
        Real Networks did that for us, after the dot-com crash. The stock promptly dropped some more, and never recovered. I've been deeply skeptical of stock-based compensation ever since...
- sulam 4y ago
  While I would avoid trying to time the market, anyone starting now has a much lower "cost basis" (they're not spending money, it's not a cost) and better chance at their RSUs appreciating while they vest. Using the last 12 months as a guide for the next 4 years isn't a reasonable way to analyze this.
  - RHSeeger 4y ago
    > they're not spending money, it's not a cost I'm not sure I follow that. If you're getting those shares instead of a higher salary, there's no effective difference between that and a cost you paid out of pocket (except for certain tax implications).
    - junofan 4y ago
      You get 4 years of exposure. You can’t pre-allocate 4 years of salary. That is the difference.
    - sulam 4y ago
      Shopify's plan is an oddity in the industry, normally one doesn't directly trade RSUs and base comp. Netflix has allowed for this (probably still does, but I haven't negotiated against a Netflix offer recently), but I don't know of any other significant examples. That said, legally, even in the specific case of the Shopify plan, you aren't taking cash and spending it on Shopify stock. If you were, your tax situation would be more complicated.
      - doktorhladnjak 4y ago
        Netflix lets you take a fraction of your pay in long term options, not RSUs
      - RHSeeger 4y ago
        > normally one doesn't directly trade RSUs and base comp You do, it just isn't spelled out. If you're getting comp in one way (RSUs), then you're not getting it in other ways (salary). The same is true of other benefits, like free food, 401k contributions, etc. It generally isn't a 1-to-1 thing, but it _is_ a tradeoff.
JAlexoid 4y ago
That is highly dependent on if the stock appreciates. I remember getting a stock grant at IBM in 2011. Let alone, OP's example is you get all cash equivalent of the full stock grant... not vesting part.
- leoqa 4y ago
  You made a bad bet. Many engineers optimize for high growth 4-year grants above all else.
  - JAlexoid 4y ago
    Considering that at that point I was with IBM for 5 years before the grant, that wasn't a bet at all
  - scarface74 4y ago
    Don’t confuse brains with a bull market…
RHSeeger 4y ago
> That's an extra 600k of upside exposure. It's also an extra 600k of downside exposure.
- MichaelBurge 4y ago
  No, the downside exposure is limited because you can quit your job. You don't have to actually eat a stock drop loss by working for 4 years and vesting a loser, you can change to another job and reset your basis.
  - MajimasEyepatch 4y ago
    True, but there's an opportunity cost to having worked at Company X on the assumption that your RSUs would appreciate in value, when in fact they decreased and you could have worked at Company Y instead.
    - kodah 4y ago
      Anecdotally, I've never had RSUs depreciate to a point at which I metaphorically lose money for my efforts. This might happen at startups more often and megacorps less often.
      - akavi 4y ago
        Then this past year you've gotten lucky. We were in an unprecedented bull run for tech stocks for a decade plus. No guarantee that continues. Markets are anti-inductive and past performance is no guarantee of future results.
      - deleted 4y ago
        [deleted]
      - asimpletune 4y ago
        This has been the case for a while, but also people who started at FB two years ago did very badly. Again, usually it works out.
cbm-vic-20 4y ago
> If you have RSUs worth 200k per year I am clearly working at the wrong company.
- fennecfoxen 4y ago
  Clearly.
- arcticbull 4y ago
  Depends on your level and your geographical location but a staff engineer could vest anywhere from 300K-800K per year depending - more if you see some meaningful stock appreciation over time. Staff engineers are like top ~10% of a company's engineers. That number can go up significantly if you're a principal engineer. 200K seems pretty average for a senior engineer role (i.e. a 'terminal' role, not an up-or-out junior role) in the Bay Area on top of a 150-200K base.

ulfw 4y ago

I don't know a single tech stock that has (significantly) appreciated over the last 12 months. I know a ton that depreciated by 2/3rds.

sokoloff 4y ago
Which leaves the employee with less upside going forward, at which point they can switch companies and "start over" with an RSU grant that is at par. In this regard the initial grant has a bit of flavor of an option. You have the option to stay on the vesting schedule or change companies and start a new vesting schedule, but any losses on unvested amounts don't hit you if you switch.
- paulmd 4y ago
  incentivizing productive employees (the ones with the most alternatives) to quit if the stock price (or the stock market generally) goes down is a hell of a side-effect when you put it like that. I guess that's the monkey-paw side of "incentivizing the employees to make the company perform by giving them a stake in the upside"...
  - sokoloff 4y ago
    That’s why a lot of companies will issue special grants to their highest performing/most critical employees if the shares drop a lot. That makes for a good “double dipping” if the shares recover.
    - marssaxman 4y ago
      Real Networks did that for us, after the dot-com crash. The stock promptly dropped some more, and never recovered. I've been deeply skeptical of stock-based compensation ever since...
sulam 4y ago
While I would avoid trying to time the market, anyone starting now has a much lower "cost basis" (they're not spending money, it's not a cost) and better chance at their RSUs appreciating while they vest. Using the last 12 months as a guide for the next 4 years isn't a reasonable way to analyze this.
- RHSeeger 4y ago
  > they're not spending money, it's not a cost I'm not sure I follow that. If you're getting those shares instead of a higher salary, there's no effective difference between that and a cost you paid out of pocket (except for certain tax implications).
  - junofan 4y ago
    You get 4 years of exposure. You can’t pre-allocate 4 years of salary. That is the difference.
  - sulam 4y ago
    Shopify's plan is an oddity in the industry, normally one doesn't directly trade RSUs and base comp. Netflix has allowed for this (probably still does, but I haven't negotiated against a Netflix offer recently), but I don't know of any other significant examples. That said, legally, even in the specific case of the Shopify plan, you aren't taking cash and spending it on Shopify stock. If you were, your tax situation would be more complicated.
    - doktorhladnjak 4y ago
      Netflix lets you take a fraction of your pay in long term options, not RSUs
    - RHSeeger 4y ago
      > normally one doesn't directly trade RSUs and base comp You do, it just isn't spelled out. If you're getting comp in one way (RSUs), then you're not getting it in other ways (salary). The same is true of other benefits, like free food, 401k contributions, etc. It generally isn't a 1-to-1 thing, but it _is_ a tradeoff.

JAlexoid 4y ago

That is highly dependent on if the stock appreciates. I remember getting a stock grant at IBM in 2011. Let alone, OP's example is you get all cash equivalent of the full stock grant... not vesting part.

leoqa 4y ago
You made a bad bet. Many engineers optimize for high growth 4-year grants above all else.
- JAlexoid 4y ago
  Considering that at that point I was with IBM for 5 years before the grant, that wasn't a bet at all
- scarface74 4y ago
  Don’t confuse brains with a bull market…

RHSeeger 4y ago

> That's an extra 600k of upside exposure. It's also an extra 600k of downside exposure.

MichaelBurge 4y ago
No, the downside exposure is limited because you can quit your job. You don't have to actually eat a stock drop loss by working for 4 years and vesting a loser, you can change to another job and reset your basis.
- MajimasEyepatch 4y ago
  True, but there's an opportunity cost to having worked at Company X on the assumption that your RSUs would appreciate in value, when in fact they decreased and you could have worked at Company Y instead.
  - kodah 4y ago
    Anecdotally, I've never had RSUs depreciate to a point at which I metaphorically lose money for my efforts. This might happen at startups more often and megacorps less often.
    - akavi 4y ago
      Then this past year you've gotten lucky. We were in an unprecedented bull run for tech stocks for a decade plus. No guarantee that continues. Markets are anti-inductive and past performance is no guarantee of future results.
    - deleted 4y ago
      [deleted]
    - asimpletune 4y ago
      This has been the case for a while, but also people who started at FB two years ago did very badly. Again, usually it works out.

cbm-vic-20 4y ago

> If you have RSUs worth 200k per year I am clearly working at the wrong company.

fennecfoxen 4y ago
Clearly.
arcticbull 4y ago
Depends on your level and your geographical location but a staff engineer could vest anywhere from 300K-800K per year depending - more if you see some meaningful stock appreciation over time. Staff engineers are like top ~10% of a company's engineers. That number can go up significantly if you're a principal engineer. 200K seems pretty average for a senior engineer role (i.e. a 'terminal' role, not an up-or-out junior role) in the Bay Area on top of a 150-200K base.