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Andy Jassey will make a lot of money as CEO of Amazon, but you're taking a long term stock comp vesting plan based on performance based incentives and comparing
by missedthecue 4y ago
Andy Jassey will make a lot of money as CEO of Amazon, but you're taking a long term stock comp vesting plan based on performance based incentives and comparing it to the annual salary of a workforce skewed by hourly paid warehouse workers.
Andy Jassey's salary is $175,000
- dymk 4y agoWe all know that CEOs get most of their comp in equity. It’s not a gotcha. It’s insanely high still, for a company laying off thousands of people.
- Retric 4y agoThat’s a pure tax dodge. His actual compensation is vastly above 175,000$ but by structuring it differently they can vastly reduce the taxes paid.
- extesy 4y agoAnd how exactly the taxes are being dodged? All those millions in RSUs are still taxed as an ordinary income when they vest.
- makestuff 4y agoNot sure if this is the case with his plan but companies will issue options to executives for the tax benefits. Typically they issue incentive stock options (ISO) and any amount over the strike price is long term capital gains.
- Retric 4y agoTime value of money means it’s better to be paid money today than in 5 years, but taxes mean it can be beneficial to get RSUs on a vesting schedule rather than cash. For ease of calculation: 50% income tax and 20% capital gains, stock doubles in value. Get paid 10M, pay 5M in tax. Buy 5M in stock which is worth 2x as much in 5 years when you sell it. Pay 5M * 20% = 1M in capital gains. Keep 9M at the end of the day. Get paid 10M in RSUs. Sell when they vest at 2x the value in 5 years. 20M pay 50% in capital gains and keep 10M.
- dh2022 4y ago<<Get paid 10M in RSUs. Sell when they vest at 2x the value in 5 years. 20M pay 50% in capital gains and keep 10M.>> You probably meant to write 20M pay 50% in income tax. I still do not get your point. This situation is tax advantageous only if the stock appreciates. if the stock is flat there is no tax advantage. If the stock declines this situation becomes a tax dis-advantage. Motivating executives to increase stock price over a medium time horizon (these RSUs vest over 4 years) to have this tax advantage is not a bad incentive...
- Retric 4y agoExecutives generally renegotiate their contracts if the stock noticeably decline before RSUs vest assuming they don’t get fired or just leave. That’s the thing executives are negotiating the kind of compensation they want and the risks they are willing to live with. The point is to get paid in a tax advantaged fashion without the risks associated with stock options.
- plasticchris 4y agoNope that’s not how it works. Get paid 10M in RSUs, when they vest at 2x: pay regular income tax on 20M. There’s no difference between an RSU vest and getting cash then immediately buying shares. Sometimes there is with options but not RSUs.
- deleted 4y ago[deleted]
- Retric 4y agoAdd dates and it clarifies what’s going on. In 2022 you get 10 million in A) RSU’s that vest in 5 years or B) cash in 2022 C) cash in 2027. Of course no company actually pays people before they do work, but this does explain why Amazon’s RSU’s don’t vest 25%, 25%, 25, 25% instead the last 2 years are 40% and 40%. And people get issues new RSU’s before the old ones finished vesting.
- 4y ago
- adave 4y agoThese are mostly stock options which they never sell and take loans against.They take on loans to excercise them so they don't get taxed at all.
- lkschubert8 4y agoThis stock award is specifically RSUs not options and RSUs are treated as taxable income the moment they vest.
- DannyBee 4y agoExcept they are not. They are all RSUs