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In your compensation letter it may say a $ value but it’s just a formulaic presentation based on the fixed # of RSUs. You’re not compensated by “You’re getting

In your compensation letter it may say a $ value but it’s just a formulaic presentation based on the fixed # of RSUs. You’re not compensated by “You’re getting $20,000 in however many RSUs that can buy at the time”. It’s “you’re getting 100 RSUs” and then whenever you get them your compensation letter states their current $ value.

s1artibartfast 4y ago
>You’re not compensated by “You’re getting $20,000 in however many RSUs that can buy at the time” In my company this is exactly how it works. Bonus is X% of salary and the exact number of RSUs and SARs is floating until the time they are granted. Everyone hopes the market has a bad day when the bonus is granted. I assumed this is how it works at all large companies.
- a4isms 4y ago
  Given a certain dollar amount (e.g. X% of salary), the number of RSUs to grant is calculated by dividing the dollar amount by the market price of the stock. There are two common ways to calculate the market price of the stock, and the difference comes down to this: 1. The market price of the stock is determined at the time of the grant, and; 2. The market price of the stock is determined at the time the RSUs vest. If there’s a one-time grant that is given immediately, the two values are usually going to be very close. But if the grant vests over some number of years (e.g. four year schedule, 25% vests after one year, remaining 75% vests monthly), the difference between the two methods can differ greatly. When the price is determined at grant time, employees benefit from the stock rising, and are penalized if the stock falls. When the price is determined at vesting time, employees end up with the same compensation no matter what the stock does, they only benefit from appreciation if they hold the stock and it appreciates after vesting. In your company, do the bonus RSUs have a vesting schedule? Or are they granted and distributed shortly thereafter?
  - s1artibartfast 4y ago
    In my company there are multiple important days: 1) Find out RSU bonus value: "you get 20% of your salary worth of RSUs" 2) Grant Date: Company Calculates the number of RSUs, issues them, and starts Vesting schedule. 3) Vesting days: Some of the RSUs become vested and can be sold by the employee. >The market price of the stock is determined at the time the RSUs vest. What is the point of giving stock priced on the vesting day? It has no chance to go up or down between the grant and vesting date when it is sellable. It would be the same as a cash bonus with an X year delay.
    - a4isms 4y ago
      > What is the point of giving stock priced on the vesting day? It has no chance to go up or down between the grant and vesting date when it is sellable. It would be the same as a cash bonus with an X year delay. An excellent question, somewhat epitomized by the late Mitch Hedberg’s joke: “I think a gift certificate is a bad gift. You take money that is good everywhere…” Same here, it’s no better than cash, only it’s a PITA to convert it to cash if you want cash. That being said, there are a few scenarios I have seen that fit the pattern: 1. Some companies have an ESPP program where some cash is deducted from each pay and placed in escrow. At regular intervals, the accumulated money is turned into shares at market value, and the employee receives the shares. There is usually a modest discount involved, e.g. 15%. If the employee sells the day the shares vest, they harvest 15% of the value less taxes. Or the employee can HODL, as they see fit. Even without a discount, some employees may prefer an ESPP to making their own investments in the company stock. There is the convenience of having the money deducted at source, many people find that an easier way to save than relying on discipline. 2. The company is cash-poor and pays some comp in stock because they have shares in their treasury. One can understand why some companies would want to do this, without agreeing that employees would prefer this to cash.
      - deadmanwalking 4y ago
        I think RSUs are better than cash. In the UK I have a choice, take my bonus as cash and pay a hefty amount for of tax, or take the same pre tax amount as RSUs hold it for a minimum 5 years so that it’s tax free.
- deleted 4y ago
  [deleted]
Scea91 4y ago
Not Amazon, but when I receive RSUs it is denominated in the dollar amount. In a year when the first part vests the dollars are converted to stock units based on the price at that moment. Thus I do not know how many units of stock I am receiving until the first vesting event, because I don't know what the price will be in a year.
- s1artibartfast 4y ago
  That makes no sense at all. Why not just give you cash with an X year delay.
  - Scea91 4y ago
    I have 4 year vesting period. After the first vest the following vests start to be denominated in stock units. I think the advantage for company is somewhat better predictability?
    - deleted 4y ago
      [deleted]
- crazygringo 4y ago
  That... is truly bizarre. I've literally never heard of that before. The entire point of RSU's (or stock options) is that if the company increases in value over time, e.g. over your first year, so does the cash value of your RSU's. That employees benefit as the company benefits. What you're describing is zero benefit at all. It's no different from just being granted cash that vests. It's such a strange and seemingly pointless thing to do, that I have to ask -- are you sure that's how it works? And if so, has someone from the company ever explained why they do that?
- zwily 4y ago
  That sounds absolutely bizarre. Why do stock the first year at all? I have never heard of anyone trying that before. edit: That setup is basically saying "you don't benefit from the increase in share value for the first year of employement", which is pretty employee-hostile. I bet a company that was doing this before stopped doing it this year, when their stock value fell by a lot. :)

s1artibartfast 4y ago

>You’re not compensated by “You’re getting $20,000 in however many RSUs that can buy at the time” In my company this is exactly how it works. Bonus is X% of salary and the exact number of RSUs and SARs is floating until the time they are granted. Everyone hopes the market has a bad day when the bonus is granted. I assumed this is how it works at all large companies.

a4isms 4y ago
Given a certain dollar amount (e.g. X% of salary), the number of RSUs to grant is calculated by dividing the dollar amount by the market price of the stock. There are two common ways to calculate the market price of the stock, and the difference comes down to this: 1. The market price of the stock is determined at the time of the grant, and; 2. The market price of the stock is determined at the time the RSUs vest. If there’s a one-time grant that is given immediately, the two values are usually going to be very close. But if the grant vests over some number of years (e.g. four year schedule, 25% vests after one year, remaining 75% vests monthly), the difference between the two methods can differ greatly. When the price is determined at grant time, employees benefit from the stock rising, and are penalized if the stock falls. When the price is determined at vesting time, employees end up with the same compensation no matter what the stock does, they only benefit from appreciation if they hold the stock and it appreciates after vesting. In your company, do the bonus RSUs have a vesting schedule? Or are they granted and distributed shortly thereafter?
- s1artibartfast 4y ago
  In my company there are multiple important days: 1) Find out RSU bonus value: "you get 20% of your salary worth of RSUs" 2) Grant Date: Company Calculates the number of RSUs, issues them, and starts Vesting schedule. 3) Vesting days: Some of the RSUs become vested and can be sold by the employee. >The market price of the stock is determined at the time the RSUs vest. What is the point of giving stock priced on the vesting day? It has no chance to go up or down between the grant and vesting date when it is sellable. It would be the same as a cash bonus with an X year delay.
  - a4isms 4y ago
    > What is the point of giving stock priced on the vesting day? It has no chance to go up or down between the grant and vesting date when it is sellable. It would be the same as a cash bonus with an X year delay. An excellent question, somewhat epitomized by the late Mitch Hedberg’s joke: “I think a gift certificate is a bad gift. You take money that is good everywhere…” Same here, it’s no better than cash, only it’s a PITA to convert it to cash if you want cash. That being said, there are a few scenarios I have seen that fit the pattern: 1. Some companies have an ESPP program where some cash is deducted from each pay and placed in escrow. At regular intervals, the accumulated money is turned into shares at market value, and the employee receives the shares. There is usually a modest discount involved, e.g. 15%. If the employee sells the day the shares vest, they harvest 15% of the value less taxes. Or the employee can HODL, as they see fit. Even without a discount, some employees may prefer an ESPP to making their own investments in the company stock. There is the convenience of having the money deducted at source, many people find that an easier way to save than relying on discipline. 2. The company is cash-poor and pays some comp in stock because they have shares in their treasury. One can understand why some companies would want to do this, without agreeing that employees would prefer this to cash.
    - deadmanwalking 4y ago
      I think RSUs are better than cash. In the UK I have a choice, take my bonus as cash and pay a hefty amount for of tax, or take the same pre tax amount as RSUs hold it for a minimum 5 years so that it’s tax free.
deleted 4y ago
[deleted]

Scea91 4y ago

Not Amazon, but when I receive RSUs it is denominated in the dollar amount. In a year when the first part vests the dollars are converted to stock units based on the price at that moment. Thus I do not know how many units of stock I am receiving until the first vesting event, because I don't know what the price will be in a year.

s1artibartfast 4y ago
That makes no sense at all. Why not just give you cash with an X year delay.
- Scea91 4y ago
  I have 4 year vesting period. After the first vest the following vests start to be denominated in stock units. I think the advantage for company is somewhat better predictability?
  - deleted 4y ago
    [deleted]
crazygringo 4y ago
That... is truly bizarre. I've literally never heard of that before. The entire point of RSU's (or stock options) is that if the company increases in value over time, e.g. over your first year, so does the cash value of your RSU's. That employees benefit as the company benefits. What you're describing is zero benefit at all. It's no different from just being granted cash that vests. It's such a strange and seemingly pointless thing to do, that I have to ask -- are you sure that's how it works? And if so, has someone from the company ever explained why they do that?
zwily 4y ago
That sounds absolutely bizarre. Why do stock the first year at all? I have never heard of anyone trying that before. edit: That setup is basically saying "you don't benefit from the increase in share value for the first year of employement", which is pretty employee-hostile. I bet a company that was doing this before stopped doing it this year, when their stock value fell by a lot. :)