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In a BigCo, no individual employee has enough influence on share price to make a difference. Share-based compensation, in a BigCo, is simply a scheme to get pub

In a BigCo, no individual employee has enough influence on share price to make a difference. Share-based compensation, in a BigCo, is simply a scheme to get public markets to pay a portion of an employee's compensation, rather than taking it out of BigCo's cash flow; employees agree to the risk involved because it may result in larger overall compensation compared a compensation scheme with a slightly larger salary and no shares. But it's much more of a lottery than a genuine chance to link harder work with higher compensation.

charcircuit 4y ago
Okay? My point is that if Zuckerberg does something to increase the stack price it will benefit people who are getting stock based compensation. I never mentioned anything about individual employees controlling it.
- solatic 4y ago
  Ok, I think I understand the point you were trying to make. As a statement by itself, sure, if your compensation is at least in part tied to the share price, then you have a financial interest in increasing the share price. But you don't benefit anymore from a rising share price if you get laid off and are no longer receiving any compensation, let alone share-based compensation, from the company (presumably you would sell your shares once you leave to ensure that your investment portfolio is diversified and you no longer have an insider perspective). Put another way, imagine that you have a choice between getting $1 guaranteed, and a 50/50 chance of getting $2 or nothing. Statistically, they have the same expected value, and you would expect a random population sample to evenly split their preferences between the two options, depending on individual appetite for risk. But actually, most people will prefer the $1 guaranteed. Indeed, even when the riskier option has a much higher statistical expected value, most people still prefer the guaranteed payout. See for example https://www.quora.com/Would-you-rather-have-a-50-50-chance-at-1-million-or-take-a-guaranteed-250K https://www.quora.com/Would-you-rather-have-a-50-50-chance-a... , and there are many such examples to draw from. So, no, I don't think employees benefit the same way from increases in stock price, as do shareholders, even when employees are also shareholders. Stability is quite simply a much stronger preference held by most employees.

charcircuit 4y ago

Okay? My point is that if Zuckerberg does something to increase the stack price it will benefit people who are getting stock based compensation. I never mentioned anything about individual employees controlling it.

solatic 4y ago
Ok, I think I understand the point you were trying to make. As a statement by itself, sure, if your compensation is at least in part tied to the share price, then you have a financial interest in increasing the share price. But you don't benefit anymore from a rising share price if you get laid off and are no longer receiving any compensation, let alone share-based compensation, from the company (presumably you would sell your shares once you leave to ensure that your investment portfolio is diversified and you no longer have an insider perspective). Put another way, imagine that you have a choice between getting $1 guaranteed, and a 50/50 chance of getting $2 or nothing. Statistically, they have the same expected value, and you would expect a random population sample to evenly split their preferences between the two options, depending on individual appetite for risk. But actually, most people will prefer the $1 guaranteed. Indeed, even when the riskier option has a much higher statistical expected value, most people still prefer the guaranteed payout. See for example https://www.quora.com/Would-you-rather-have-a-50-50-chance-at-1-million-or-take-a-guaranteed-250K https://www.quora.com/Would-you-rather-have-a-50-50-chance-a... , and there are many such examples to draw from. So, no, I don't think employees benefit the same way from increases in stock price, as do shareholders, even when employees are also shareholders. Stability is quite simply a much stronger preference held by most employees.