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There's no reason why this is beneficial. Money and stocks are fungible you can freely exchange one for the other as much as your heart desires. There's no diff

There's no reason why this is beneficial. Money and stocks are fungible you can freely exchange one for the other as much as your heart desires. There's no difference between which one you receive.

RhodesianHunter 2y ago
You seem to have missed an absolutely critical element of what drives human behavior. We call it "incentive".
- overrun11 2y ago
  Yes both the money and the stock are incentives and they are of equal value. You've still failed to explain why one is better than the other.
  - RhodesianHunter 2y ago
    Stock vests over time. By providing stock instead of cash the company incentivizes the employee to do their best, because that will ostensibly help the stock to be worth more than the cash by the time it vests. Hence, incentive. Does that make more sense?
nostrademons 2y ago
Money and stocks would be fungible if all companies were public, all investors had perfect information, and no employee could make a difference in the stock price of their employer. All three of those conditions are false. You may be working for a private company that you would not otherwise be able to buy the stock of; sometimes, employment is the only way to get ownership of it. You often have better information about how your own employer is doing than you do about random public companies. And for smaller companies, you can often make a difference in the company's bottom line. This is why companies offer stock compensation in the first place, as an incentive for you to have a stake in the company's success. If your company is a shithole or fraud, then you absolutely do not want to be receiving company stock. But then, if that's the case you may want to re-evaluate working for it at all.
bognition 2y ago
Let's ignore that most of the places people work are not publicly traded companies and pretend that any employee could buy stock in their employer. If that were the case and employees were compensated equally in stock vs cash, then yes there is no _rational_ difference. However, most human are not rational. People like to take pride in their work and do a great job, this is amplified when they stand to directly benefit from their efforts. By enabling employees ownership in a company you're hoping to incentivize them to work harder and therefore amplify the return on their labor.
- bumby 2y ago
  >If that were the case and employees were compensated equally in stock vs cash, then yes there is no _rational_ difference. Even if this assumes an equal net present value, wouldn't the volatility of stock vs. cash make a very rational difference in expected future value? For people who are risk adverse, the cash would probably be preferred; for those who are less risk adverse, the opposite is probably true.
- overrun11 2y ago
  The private company case is worse because now it's completely illiquid. This all strikes me as a rich person's idea of what poor people want. Someone making $15/hour wants the $15 not $10 + equity in a private company worth $5 which they cannot sell but gives them 1/1000 voting rights and maybe sometimes a 7 cent a quarter dividend subject to board approval and market whims. Most workers are not sophisticated investors and I'd rather they put excess savings into broadly diversified index funds instead of low quality equity in whatever small business they happen to be working at.
  - parpfish 2y ago
    how does equity in privately held companies work? I get that some share provide voting rights, but that's not generally what to employees. when the people in the article cash out their ESOP shares to buy a house... who's on the other end of that deal to buy those shares? is it some other employee? Wouldn't that mean that money is just switching hands between your employees rather than helping all your employees get rich? related: i exercised some options for a startup that i used to work at a few years ago. they're now >10 years old and financially healthy, but no IPO in sight. what's the point of those shares if there's never an exit?
stagger87 2y ago
In an ESOP, stocks are not normally fungible and cannot be traded easily. Usually they are bought back post employment. In my case I was able to either get cash or have it put into a 401k.

There's no reason why this is beneficial. Money and stocks are fungible you can freely exchange one for the other as much as your heart desires. There's no difference between which one you receive.

RhodesianHunter 2y ago

You seem to have missed an absolutely critical element of what drives human behavior. We call it "incentive".

overrun11 2y ago
Yes both the money and the stock are incentives and they are of equal value. You've still failed to explain why one is better than the other.
- RhodesianHunter 2y ago
  Stock vests over time. By providing stock instead of cash the company incentivizes the employee to do their best, because that will ostensibly help the stock to be worth more than the cash by the time it vests. Hence, incentive. Does that make more sense?

nostrademons 2y ago

Money and stocks would be fungible if all companies were public, all investors had perfect information, and no employee could make a difference in the stock price of their employer. All three of those conditions are false. You may be working for a private company that you would not otherwise be able to buy the stock of; sometimes, employment is the only way to get ownership of it. You often have better information about how your own employer is doing than you do about random public companies. And for smaller companies, you can often make a difference in the company's bottom line. This is why companies offer stock compensation in the first place, as an incentive for you to have a stake in the company's success. If your company is a shithole or fraud, then you absolutely do not want to be receiving company stock. But then, if that's the case you may want to re-evaluate working for it at all.

bognition 2y ago

Let's ignore that most of the places people work are not publicly traded companies and pretend that any employee could buy stock in their employer. If that were the case and employees were compensated equally in stock vs cash, then yes there is no _rational_ difference. However, most human are not rational. People like to take pride in their work and do a great job, this is amplified when they stand to directly benefit from their efforts. By enabling employees ownership in a company you're hoping to incentivize them to work harder and therefore amplify the return on their labor.

bumby 2y ago
>If that were the case and employees were compensated equally in stock vs cash, then yes there is no _rational_ difference. Even if this assumes an equal net present value, wouldn't the volatility of stock vs. cash make a very rational difference in expected future value? For people who are risk adverse, the cash would probably be preferred; for those who are less risk adverse, the opposite is probably true.
overrun11 2y ago
The private company case is worse because now it's completely illiquid. This all strikes me as a rich person's idea of what poor people want. Someone making $15/hour wants the $15 not $10 + equity in a private company worth $5 which they cannot sell but gives them 1/1000 voting rights and maybe sometimes a 7 cent a quarter dividend subject to board approval and market whims. Most workers are not sophisticated investors and I'd rather they put excess savings into broadly diversified index funds instead of low quality equity in whatever small business they happen to be working at.
- parpfish 2y ago
  how does equity in privately held companies work? I get that some share provide voting rights, but that's not generally what to employees. when the people in the article cash out their ESOP shares to buy a house... who's on the other end of that deal to buy those shares? is it some other employee? Wouldn't that mean that money is just switching hands between your employees rather than helping all your employees get rich? related: i exercised some options for a startup that i used to work at a few years ago. they're now >10 years old and financially healthy, but no IPO in sight. what's the point of those shares if there's never an exit?

stagger87 2y ago

In an ESOP, stocks are not normally fungible and cannot be traded easily. Usually they are bought back post employment. In my case I was able to either get cash or have it put into a 401k.