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Re:Shopify lets staff decide cash-stock pay mix as shares dive by paxys on Friday September 16, 2022 @11:15AM (#32867197)
This is becoming more and more common at large tech companies. Stripe does the same thing.

Over the last decade and a half tech employees have enjoyed massive returns due to stock appreciation during their vesting term, and now employers want to eliminate that. Of course the flip side is that when the stock goes down - like right now - then employees benefit.

Ultimately they’re all going to cut out stocks entirely and just pay cash salary and bonus, like every other industry.

Re:Shopify lets staff decide cash-stock pay mix as shares dive by twblalock on Friday September 16, 2022 @11:23AM (#32867336)
Why on earth would employers want to eliminate those massive returns? That's been an amazing tool for employee retention, especially for FAANG. If they reverted to paying cash plus bonus, they would be less competitive when hiring and retaining people.

The companies that are changing this are the ones whose stock tanked, and they are worried that employees will leave because of it. Companies whose stock did not tank are retaining their normal compensation programs.

Re:Shopify lets staff decide cash-stock pay mix as shares dive by wikfwikf on Friday September 16, 2022 @12:18PM (#32868326)
This is foolish.

When public companies give stock to their employees, they dilute the stock as much as if they issued stock and sold it. So the cost of that compensation is the same as if it were in cash.

If everyone knows that say, Netflix's stock price is guaranteed to go up 20% a year for the next 5 years, then the market price of that stock would suddenly jump up to the point where it no longer makes excess returns. So the market price of the stock reflects the company's (risk-adjusted) growth potential already. This also applies to non-public companies with any amount of maturity - the marginal investor has a good sense of what the company is worth and does not want to lose out by issuing stock below that.

Put these two together and giving employees stock is economically not very different to giving them money and they choosing to invest it in mutual funds. The main difference is that you make your employees' lives slightly harder - with taxation and with the fact that they need to sell stock to get cash for what they want to buy or invest in.

The reason that stock options are preferred, especially for private companies, are none of them very good. Firstly employees have an inflated perception of what their company will be worth in the future. They assume that it's going to be AirBnB, not WeWork, not Palantir, and not the failed start-up that you've never heard of. Secondly employees also don't correctly discount uncertainty. Would you rather have the cash to buy your dream home/pay off your mortgage, or take a 10% chance of 10 times that amount of money? To most of us the second option is worth considerably less. Thirdly companies sometimes feel better about giving out pieces of paper that they have an unlimited supply of than giving out their own cash, even though it's a wash financially. And lastly there used to be some tax advantages to firms paying with stock options - those were loopholes which have largely been closed.

Making your employees into investors (by giving them stock options) only made economic sense when venture capital money was scarce and expensive. This has not been the case for a long time.

Re:Shopify lets staff decide cash-stock pay mix as shares dive by joshl32532 on Friday September 16, 2022 @03:09PM (#32870656)
> When public companies give stock to their employees, they dilute the stock as much as if they issued stock and sold it. So the cost of that compensation is the same as if it were in cash.

Companies DO prefer to grant RSU instead of cash bonus, because it'll provide liquidity to their stock and make employees engaged with the company's performance. One of Netflix's benefit is they're cash heavy in their compensation, which SWE do prefer.

The dilution is not a problem, since they'll buyback stocks anyway.

Re:Shopify lets staff decide cash-stock pay mix as shares dive by wikfwikf on Friday September 16, 2022 @04:34PM (#32871683)
Buybacks are not alchemy; buying back stock just uses the same money that you saved when you issued stock instead of paying in cash.

Of course, the stock price might have gone down, but also it might not. Companies don't usually time buybacks right to buy stock cheaply.

Re:Shopify lets staff decide cash-stock pay mix as shares dive by peyton on Friday September 16, 2022 @08:49PM (#32873798)
Oh, no, generally buybacks are timed strategically.
Re:Shopify lets staff decide cash-stock pay mix as shares dive by dcow on Friday September 16, 2022 @02:08PM (#32869875)
Specifically regarding your second paragraph: I think you’re overlooking the market’s ability to value tech stock. If everyone knows Netflix is gonna jump 20% a year for the next 5 years then everyone would dump their entire savings, take the penalty and reinvest their IRAs even, into Netflix. Why doesn’t this happen?
Re:Shopify lets staff decide cash-stock pay mix as shares dive by wikfwikf on Friday September 16, 2022 @04:32PM (#32871666)
Because there is never a point at which everyone knows that Netflix is going to jump 20% a year for 5 years.

That's my point. There are times at which people think this is what it's going to do, and after it's done it lots of people believe it to have been clear in hindsight. But the situation where people know in advance for sure that there will be huge excess returns never occurs.

Netflix is a great example. Would you have been keen to take a large amount of income deferred and in stock at the point when streaming was just a weird perk bundled with the DVD mailing subscription?

Re:Shopify lets staff decide cash-stock pay mix as shares dive by peyton on Friday September 16, 2022 @08:48PM (#32873792)
Typically comes from the buyback pool, and buybacks are preferred to dividends for a variety of reasons, so in practice what you’re saying doesn’t apply.
Re:Shopify lets staff decide cash-stock pay mix as shares dive by PragmaticPulp on Friday September 16, 2022 @06:54PM (#32873068)
> The companies that are changing this are the ones whose stock tanked, and they are worried that employees will leave because of it.

This is exactly why companies are doing it.

If you're compensated in units of stock and the stock price goes down, you are incentivized to switch to another company to restart the whole process.

It's a negative feedback loop. Company struggles -> stock price declines -> employees leave -> company struggles more -> repeat.

I know employees want the best of both worlds (stock appreciation when it goes up, refreshers when it goes down) but realistically I expect more companies to move toward defined cash payouts now that we're out of the unusual bull market of the past decade.

Re:Shopify lets staff decide cash-stock pay mix as shares dive by opportune on Friday September 16, 2022 @03:28PM (#32870891)
Because during those 2nd, 3rd, 4th years those employees have much larger compensations than they would get on the market, and companies would rather keep the stock if they don’t need to compensate employees that much to retain them.

Many of the companies that are doing this are near-IPO or post-IPO trying to make their finances better. With GAAP, IIUC RSUs are recorded as expenses/count against shareholder equity at the vested price. So if you are a company trying to become GAAP profitable, even if you don’t claw back old appreciated grants, you can prevent the problem going forward/appease shareholders concerned about the impact on GAAP profitability by preventing appreciation. A long-dated RSU is a liability that can become expensive.

Also personally I think getting highly appreciated RSU comp can introduce incentives like employees staying at a company longer than they should or want to (ie because they are burnt out or disengaged) since it may not be possible to find another job that compensates you nearly as much. And, it creates very large pay gaps - an entry level employee who joined 2 years ago may be making more than a staff level employee hired recently.

I think RSUs are amazing for employees and the vesting/expected refresher details are a very important thing I look at when evaluating working somewhere. But many other people probably just look at the Year1 TC which doesn’t include appreciation or refreshers at all. I think enough people are like me that traditional RSUs won’t disappear any time soon, but I expect more companies to try to see what they can get away with in reducing equity comp.

Re:Shopify lets staff decide cash-stock pay mix as shares dive by ericmay on Friday September 16, 2022 @11:46AM (#32867729)
If they all wink wink do it at the same time then it doesn’t matter.
Re:Shopify lets staff decide cash-stock pay mix as shares dive by twblalock on Friday September 16, 2022 @11:50AM (#32867810)
Yeah but they aren't. And they won't.

If there was collusion going on, compensation never would have skyrocketed over the past decade.

Re:Shopify lets staff decide cash-stock pay mix as shares dive by mrguyorama on Friday September 16, 2022 @02:42PM (#32870338)
There have been multiple times in the past decade that FAANG colluded to decrease wages.
Re:Shopify lets staff decide cash-stock pay mix as shares dive by twblalock on Friday September 16, 2022 @02:57PM (#32870525)
I can only think of one, and it was an anti-poaching agreement from 2005 that the involved companies paid compensation for later. I haven’t seen any reason to believe that is still happening.
Re:Shopify lets staff decide cash-stock pay mix as shares dive by marvin on Friday September 16, 2022 @05:33PM (#32872270)
I wonder what kind of collusion Europe is up to, with salaries at 50%-20% of those available in the US.
Re:Shopify lets staff decide cash-stock pay mix as shares dive by peyton on Friday September 16, 2022 @08:50PM (#32873804)
Productivity is generally lower.
Re:Shopify lets staff decide cash-stock pay mix as shares dive by marvin on Monday September 19, 2022 @03:06PM (#32902504)
2x-5x? Color me skeptical. Depending on what's behind that statement, it could actually be a bit insulting. I've been to US tech conferences; US developers aren't doing anything differently than the Northern European ones. Many times, I've heard discussions of at those conferences of processes that are more broken than the ones I wrestle with.

It's a combination of corruption, collusion, widespread inefficiencies that limits high salaries at the margins (meaning that the marginal company available to each employee is never desperate), very high pre-payroll hidden taxation. Also, importantly I think, a lack of competition between multiple globally dominant tech companies with huge profits per employee and a very obvious pathway to monetizing each additional employee's labor.

So, complex answer. But I'd stake money that collusion, often silently government-sanctioned, is significantly more common than in the US.

An example of this is very common in Norway, where practically all education is state-funded and the number of students for each profession is directly decided by the state. Private-sector interest groups have almost direct control over some of these processes, disguised as a public debate in the newspapers leading up to quota decisions. This leads to an almost planned economy of the availability of professionals.

Re:Shopify lets staff decide cash-stock pay mix as shares dive by faangiq on Friday September 16, 2022 @12:00PM (#32868009)
Comp is still 2x less than it should be
Re:Shopify lets staff decide cash-stock pay mix as shares dive by foobarian on Friday September 16, 2022 @11:53AM (#32867868)
Should that be FAAG? Wasn't Netflix famously the one big tech co that paid all cash?
Re:Shopify lets staff decide cash-stock pay mix as shares dive by kevdozer1 on Friday September 16, 2022 @01:45PM (#32869558)
I just don't think that acronym will catch on
Re:Shopify lets staff decide cash-stock pay mix as shares dive by BMorearty on Friday September 16, 2022 @11:32AM (#32867484)
Replacing stock compensation with cash salary and bonus would be a terrible idea.

Other industries should be moving toward employee ownership, not the other way around. Employee ownership creates shared incentives. Shared incentives create alignment. Alignment helps eliminate an antagonistic relationship between employees and management. Instead of them vs. us, it moves it more towards all us. Instead of the fat cats and the lowly workers, everyone gets to reap the benefits or share the losses. Of course the founders and execs get more, I'm not saying it's equal, but it is a far better system than pure cash.

Re:Shopify lets staff decide cash-stock pay mix as shares dive by neon_electro on Friday September 16, 2022 @11:37AM (#32867561)
I can agree with this in principle, but in practice, who gets to write the contract governing this stuff? Do employees get a say?

I had options at my last job. They were worthless to me the entire 4.5 years I spent there. It wasn’t until 2 weeks after I was let go the company announced it was being acquired and my lottery tickets became worth something.

4.5 years of opportunity to be engaged at a deeper level as a shared owner of the business, wasted because the business never wanted me to be a part owner in the first place.

Definitely looking for more companies that operate the way you would expect here!

Re:Shopify lets staff decide cash-stock pay mix as shares dive by PuppyTailWags on Friday September 16, 2022 @11:58AM (#32867978)
> I can agree with this in principle, but in practice, who gets to write the contract governing this stuff? Do employees get a say?

This is precisely what unions are for. It's possible to develop a professional organization that then informs expected standards of employment, such as shares in ownership of the company. The Actors Guild for example will specify and fight for the intellectual property of actors part of the guild, including in contracts where members of the guild are hired.

Re:Shopify lets staff decide cash-stock pay mix as shares dive by BMorearty on Friday September 16, 2022 @11:49AM (#32867789)
Were you able to exercise those options after the acquisition was announced? Did you finally get the payday you were hoping for?
Re:Shopify lets staff decide cash-stock pay mix as shares dive by neon_electro on Friday September 16, 2022 @10:09PM (#32874156)
Yes - the contract I had agreed to allowed for some time to elapse after being let go and I would still be able to exercise the options.

I got a payday of $27k before taxes, $18k after taxes. In my opinion, I should've negotiated $10k additional salary if not more when I got the job; it would have been a far better payout without any 4 year requirement of loyalty (I was not appropriately rewarded for said loyalty).

Re:Shopify lets staff decide cash-stock pay mix as shares dive by crote on Friday September 16, 2022 @11:59AM (#32867996)
On the other hand, stock compensation does come with significant drawbacks.

Due to tax implications, your options might be worth significantly less - if anything at all - because you often have to pay taxes before you are able to sell them. If your company is not yet publicly traded, there is a significant chance it'll be heavily diluted by the time you are able to actually sell it. Even worse, you might never be able to sell it. You might not be able to leave the job when you want to, because you are essentially tied to the stock option vesting period. It also significantly increases your personal risk: what happens when the company performs poorly? You might lose both your job and your wealth at the same time.

The way I see it, the antagonistic relationship exists because management is judged primarily by the shareholder value they create. To an employee, the company is their daily life. To a shareholder, the company exists solely as a means to create money. I would not want to work in a company where everyone is driven solely by shareholder value.

Personally, I'd strongly prefer it if the employer had a workers council, and just gave out bonuses when it was doing good. You still share in the benefits, but you have far less personal risk.

Re:Shopify lets staff decide cash-stock pay mix as shares dive by JAlexoid on Friday September 16, 2022 @02:10PM (#32869917)
> You might not be able to leave the job when you want to

That is something that people love to ignore - vesting periods are created specifically to keep you from leaving for a better job. While keeping the risk for the company fairly low.

Low mobility has been proven time, and time again, to repress income growth in people. (more often linked to owning a home, and not being able to move for a job)

Re:Shopify lets staff decide cash-stock pay mix as shares dive by JAlexoid on Friday September 16, 2022 @02:06PM (#32869845)
That's a load of BS.

You're an employee, not a co-owner. You're paid to do a job and, more often than not, your input is completely irrelevant to the leadership.

And as someone who is paid to do a job, not to be a practical co-owner, you should be paid in cash.

I currently work at a 50 people startup... and guess what? I'm no co-owner, no matter how much options I get. Last reorganization was done without my input... and no one will ask in the future. If you think you're anything more than a service provider - you're either in the executive management or deluded.

Re:Shopify lets staff decide cash-stock pay mix as shares dive by BMorearty on Friday September 16, 2022 @02:52PM (#32870478)
You’d rather the tech industry work like industries where only founders and executives reap windfalls of exit events? If your reply is that the company can offer bonuses when the exit event happens, (1) most companies don’t do this after the fact but stock is a way to force it to happen and (2) this doesn’t help employees who stayed for many years but didn’t happen to be there at the moment of the exit.
Re:Shopify lets staff decide cash-stock pay mix as shares dive by bombcar on Friday September 16, 2022 @01:26PM (#32869305)
Most employees ditch the stock as fast as they can, and arguably they should.
Re:Shopify lets staff decide cash-stock pay mix as shares dive by vineyardmike on Friday September 16, 2022 @01:39PM (#32869489)
> employee ownership, not the other way around. Employee ownership creates shared incentives. Shared incentives create alignment. Alignment helps eliminate an antagonistic relationship between employees and management.

I don’t think this scales to something big. Eg Amazon gives stock. Amazon even gave stock to warehouse workers. I don’t think many people, from warehouse workers to senior AWS SDEs feel a true sense of shared alignment, and I bet many share a sense of antagony with management.

I work at a different megacorp. I don’t feel meaningfully like an owner. My 500k in RSUs is meaningless compared to the $2T market cap. Nancy Pelosi probably owners more shares than me.

Re:Shopify lets staff decide cash-stock pay mix as shares dive by gpderetta on Friday September 16, 2022 @11:26AM (#32867387)
But as long as the cash bonus has the same nominal value as the stock grant there is not much of a downside for the employee as in the worst case they can just buy the stock on the market (which should be possible for a large tech company).
Re:Shopify lets staff decide cash-stock pay mix as shares dive by twblalock on Friday September 16, 2022 @11:34AM (#32867520)
From experience, that's not true. A bonus of $N is worth $N. A stock grant of $N has turned out to be worth $2.5*N or even more, by the time it finishes vesting.

Could it have gone the other way? Of course, and it's often likely that at startups stock could be worth zero. But at large companies, even with the recent dips in stock prices, employees who joined 2+ years ago are better off with stock grants than they would have been with equivalent fixed-size cash bonuses -- so much so, that would often have to take a pay cut to work anywhere else.

Re:Shopify lets staff decide cash-stock pay mix as shares dive by time_to_smile on Friday September 16, 2022 @12:25PM (#32868421)
> by the time it finishes vesting.

Right and during that vesting period if you had been paid cash you could have invested that money in a wide range of assets that are both more liquid and are not perfectly correlated with your source of income.

Now if we're talking a bonus that would be paid at the end of the vest period such that you can't invest that money until you would have vested anyway then stocks is theoretically going to have increased by the risk free rate, so it's expected value will be higher than the bonus (however it's much higher variance).

Everyone has weird thoughts in their heads about RSUs people the last decade has been insane, and no one remember the last tech crash. The next one will be bigger and when you realize you are getting laid off at the same time that your RSU drop to near zero, it will feel like the variance might not be worth it.

Re:Shopify lets staff decide cash-stock pay mix as shares dive by ghaff on Friday September 16, 2022 @02:00PM (#32869773)
>Everyone has weird thoughts in their heads about RSUs people the last decade has been insane, and no one remember the last tech crash. The next one will be bigger and when you realize you are getting laid off at the same time that your RSU drop to near zero, it will feel like the variance might not be worth it.

As I wrote elsewhere, who knows? But in the dot-bomb crash, large solvent companies saw their stock tank by 95%. And, by the way, to first approximation no one was hiring so you're not just going to hop to another company.

Hopefully everything will be reasonably fine but I think a lot of people have an unrealistic expectation of worst case scenarios.

Re:Shopify lets staff decide cash-stock pay mix as shares dive by gpderetta on Friday September 16, 2022 @11:45AM (#32867721)
If you get the cash immediately, then you still buy the stock on the market if you expect it to go up. If the cash also comes on a vesting schedule, if you expect the stock to go up, you could buy call options on the market with expiries that match the original schedule, at the current strike price. Of course this has much more friction and some cost.
Re:Shopify lets staff decide cash-stock pay mix as shares dive by everforward on Friday September 16, 2022 @12:29PM (#32868486)
Right, but the stocks start earning value immediately and cash bonuses do not. Assuming gains are even at 5% per year, and the bonus is $100k (because the math is easier):

With RSU's, you get $400k1.05^4 (4 years of compounded growth)

With cash, assuming you immediately invest the money, you get $100k1.05^4 + $100k1.05^3 + $100k1.05^2 + $100k *1.05

Running those numbers, the RSU's are worth $486,202 at the end and the cash is worth $452563. RSU's appreciated by $86k over the duration, cash appreciated $52k over the duration.

It's the time value of money. Getting it earlier makes it worth more.

Re:Shopify lets staff decide cash-stock pay mix as shares dive by gpderetta on Friday September 16, 2022 @12:35PM (#32868607)
Yes, that's why I suggest you should buy calls on the day your grant would have been assigned if you think the stock will go up.

Of course most people won't do it because is very risky. Yet getting RSUs has similar risk (or larger as you can lose more than the option premium).

There might be US tax implications that I'm not familiar with of course.

Re:Shopify lets staff decide cash-stock pay mix as shares dive by darkwizard42 on Friday September 16, 2022 @02:53PM (#32870486)
You aren't allowed to do this in the US. Lot of regulations on your RSUs and when you can sell etc. including derivatives on your vested and unvested stock.
Re:Shopify lets staff decide cash-stock pay mix as shares dive by gpderetta on Friday September 16, 2022 @03:14PM (#32870713)
We are talking about a scenario in which you get cash not RSU.

Also I'm not familiar with the US case, but I understand those limitations are contractual not regulatory and thus have no bearing in what's would be optimal for the employee.

Re:Shopify lets staff decide cash-stock pay mix as shares dive by vineyardmike on Friday September 16, 2022 @01:49PM (#32869615)
30K of missed growth on 400K doesn’t seem so bad to not have 400K tied up in a single company.

If, along those 4 years, your company tanks 25% (Shopify tanked over 50%), you’ll be able to abandon the investment (and get 100k a year of something else), or double down and get more shares (aka dollar cost averaging).

Re:Shopify lets staff decide cash-stock pay mix as shares dive by JAlexoid on Friday September 16, 2022 @02:14PM (#32869973)
Cash sign on bonuses typically get paid out early, and have an "unearned" timeframe.

Therefore you get cash earlier, than any stock.

Re:Shopify lets staff decide cash-stock pay mix as shares dive by sokoloff on Friday September 16, 2022 @12:43PM (#32868738)
You have to use two ** to "escape" the italicizing that happens with multiple single * in your post.
Re:Shopify lets staff decide cash-stock pay mix as shares dive by ryanisnan on Friday September 16, 2022 @11:19AM (#32867271)
If I'm an employee earning equity vs cash, I damn well want to make sure my incentives are aligned with the companies, e.g. the value increasing. This seems a bit perverse.
Re:Shopify lets staff decide cash-stock pay mix as shares dive by JAlexoid on Friday September 16, 2022 @11:48AM (#32867769)
The best way to increase stock value in short/mid term - cut costs... (aka your salary/position)

Your incentives never align with any of the publicly traded major tech companies.

Small startups - yes, you have more leeway. Google, Facebook, Apple - yeah, no... outside of top management, your fixes to their mapping application have sweet all to do with stock value.

Re:Shopify lets staff decide cash-stock pay mix as shares dive by ryanisnan on Saturday September 17, 2022 @03:23PM (#32880564)
Great point! As a non FAANG employee, I am mostly considering the startup landscape, where I do expect my contributions to directly correlate to share value.
Re:Shopify lets staff decide cash-stock pay mix as shares dive by echelon on Friday September 16, 2022 @11:24AM (#32867356)
Startups will offer stock and win.

If tech workers were united in fleeing giants to found or work at nimble upstarts, we would reap nearly all of the rewards.

Re:Shopify lets staff decide cash-stock pay mix as shares dive by neon_electro on Friday September 16, 2022 @11:41AM (#32867638)
Not when the best the nimble upstarts are offering in positions where equity is on the table are options, not shares.

I’m all for more employee ownership and engagement from being a shareholder in addition to an employee, but I’d love to see startups equally interested in that.

Re:Shopify lets staff decide cash-stock pay mix as shares dive by lr4444lr on Friday September 16, 2022 @01:07PM (#32869047)
I don't think you want this. Even in a firm that is under 10 mil., if you are granted hard equity, you're going to be liable for taxes on those shares, which will be extremely illiquid. Options or RSUs let you have your cake and eat it too, at a small price.
Re:Shopify lets staff decide cash-stock pay mix as shares dive by neon_electro on Friday September 16, 2022 @10:07PM (#32874149)
You're right - I don't want to touch equity any more. I know how to buy stocks and bonds for mid-to-long term investments, I hope and expect my next employer to prioritize cash/salary-based compensation.
Re:Shopify lets staff decide cash-stock pay mix as shares dive by LudwigNagasena on Friday September 16, 2022 @11:29AM (#32867433)
The choice depends on your risk tolerance/aversion.
Re:Shopify lets staff decide cash-stock pay mix as shares dive by JAlexoid on Friday September 16, 2022 @11:42AM (#32867657)
With larger companies stock grants are of little value to gain.

I joined GrubHub 3 months before the stock tanked. I haven't even vested the first tranche, before my RSUs tanked over 2x.

Thank god I learned enough in my life, to demand cash sign on bonus... that ended up being larger than the RSU grant.

Remember the golden rule - $1k today, is better than possible $10k in 4 years. (feel free to scale it up as you wish)