That's not my experience. My TC is the amount I'll actually make this year (and have made in previous years), which includes my salary, bonus, and the value of the RSUs at vesting, which I auto-sell. I'm not "delaying" anything; I'm making great money right now. Unvested shares only matter to the extent that your future income might over/underperform current predictions to some extent. I definitely don't consider them "mine" yet in any way; they're simply a leading indicator of my estimated future TC at this company if I continue to stay employed here.
Options, yes, are a different matter, but RSUs in big companies are almost as good as cash (and when the market is going up, as it has been this past decade, they're better than cash).
Options in a startup are extremely likely to be worth nothing, ever. Not only does the company need some sort of liquidity or exit event, but the valuation then also has to be higher than the strike price on your options. And options usually have punishing exercise-or-lose-them requirements if you leave the company before a liquidity event.
RSUs, once they vest, are yours without having to exercise them. If it's a public company you can turn around and sell them on the open market immediately if you desire and get cash for them. If the company's stock declines, your RSUs are still worth something since the "basis" is $0. If you leave the company, your vested RSUs are still yours.
Yes 1-year cliffs for vesting are common and do defer compensation, but 1 year is not a long time at all to be at a company especially a large public company. After the first year the regular vesting cadence sets in and it's just a slightly more complicated form of cash, with market risk.
Over the past few years that market risk has hugely benefitted most tech companies and RSU recipients. In 2020 my RSU comp was more than 50% of my total comp, basically doubling my (already high) base salary. ESPP further compounded that.
As a personal example, I previously worked at Airbnb and had a mixture of options and RSUs. Some of my RSUs were only months away from their expiration date when the company went public; if anything had delayed the IPO much longer, they would have disappeared. With the options, I could have bought them and prevented them from disappearing even had the company not gone public. As a result, leading up to the IPO I was moderately worried about my RSUs, but not particularly worried about my options.
FWIW, you're probably thinking about ISOs ("incentive stock options") when you refer to the "punishing exercise-or-lose-them requirements;" companies can also offer NQSOs ("non-qualified stock options"), which are less tax-advantaged but can offer long exercise timeframes even after you leave the company. A lot of the "unicorn" startups, including Airbnb, allowed ISO holders to convert to NQSOs for that reason.
Options vs RSUs is a tricky subject and the ideal choice varies based on circumstance.
The quotes around "basis" here make me think you probably know this, but just in case someone needs this nit picked: this "basis" being referred to here is emphatically not the "cost basis" for tax purposes. If a $50 share vests and you sell it for $55, you have a cost basis of $50, giving you $50 income and $5 capital gain.
The question is, would you have had excellent returns if the company had been worth $1m per employee?
If you own 10% of a company and it sells for 2x the invested value, you might get < 5% of the sale price yourself once the investors are taken care of.
These two are very different things and they shouldn't be conflated. If you have FAANG RSUs vesting every few months or every year, you can convert them to cold hard cash on a regular basis.
Options in a startup, or a company that isn't traded publicly are a different animal.
Pity we didn't get an exit back in 2000 when I had 0.5% of Poptel (everyone was a dollar millionaire at one point).
At the moment I have EMI shares in my current employer which vest on change of control
I think more companies now have a policy where your RSUs vest every quarter, and there's no cliff (except for possibly the first new-hire grant[0]). So yes, it's delayed, but in practical terms you get your first vest within 3 months of getting the grant. (And if your company doesn't do refresh grants periodically, and equity is important to you, you should find another company.)
> Even when you hate your job, you will be hesitant to leave the company because of FOMO and sunk cost fallacy
This is unfortunately true. I do know people who aren't happy in their job (maybe not to the point of actively hating it), but stick around because of their golden handcuffs. I tend not to worry about that too much; they've decided[1] that being unhappy is worth the cash, and it's not a bad problem to have to be able to make that choice.
> That said, anecdotally, every one of my close circle of friends made decent amount money from equity
Exactly.
[0] Which I have a hard time complaining against. The company probably just spent $50k of its own resources to hire you, and I don't mind that they don't want to give you any equity until you've been there for a year.
[1] Then again, negotiation may be able to get similar equity terms at a new company that could presumably make them happy, and I think many people discount that fact.
For anyone "stuck" in this situation, recruiters from the other FAANGs you don't currently work at will try to match unvested shares in their offer. It always pays to interview once a year or so to see what the current offers are like, and it's fun to try out the other microkitchens. Well, until 2020 I guess.
That's extreme selection bias. One of the major ways startups recruit is via friends.
That said, anecdotally, every one of my close circle of friends made decent amount money from equity (one of the many companies they worked at did very well) - far higher than the 10% stat that I hear talked about. May be the last two decades was lucky for this group of people.