4 ms·
> 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
by mrep 4y ago
> 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.
So 10M comp package + 0 starting capitol vs 0 comp package + 5M starting capitol? The latter isn't a comp package.
- Retric 4y agoNobody is going to pay you before you do the work, but “Time value of money means it’s better to be paid money today than in 5 years” Thus, 10M in RSU that vest in 5 years > 10M in cash today (not a real option) > 10M in cash in 5 years. However, this also helps explain 5%,15%, 40%, 40% vesting schedules they are somewhat better than 25%,25%,25%,25% for the company because it better incentivizes staying and for the employee due to tax advantages.
- mrep 4y agoBut there are no tax benefits. If you get 10M in RSU that vest in 5 years and in 5 years when they vest they are now worth 20M, you get taxed for 20M of income and not 10M income + 10M cap gains.
- Retric 4y agoThis gets more into the weeds, RSUs rarely vest evenly across time. A 10,10,40,40 has tax advantages over a 25,25,25,25 vesting schedule. Further, RSUs are only one aspect of a compensation package. If someone can negotiate both RSUs and a golden parachute then they are simply better off than taking that exact same salary in cash. The nuances of every contract are different, but it’s not difficult to construct something more advantageous than cash.