In your compensation letter it may say a $ value but it’s just a formulaic presentation based on the fixed # of RSUs.

You’re not compensated by “You’re getting $20,000 in however many RSUs that can buy at the time”. It’s “you’re getting 100 RSUs” and then whenever you get them your compensation letter states their current $ value.

>You’re not compensated by “You’re getting $20,000 in however many RSUs that can buy at the time”

In my company this is exactly how it works.

Bonus is X% of salary and the exact number of RSUs and SARs is floating until the time they are granted.

Everyone hopes the market has a bad day when the bonus is granted.

I assumed this is how it works at all large companies.

Given a certain dollar amount (e.g. X% of salary), the number of RSUs to grant is calculated by dividing the dollar amount by the market price of the stock. There are two common ways to calculate the market price of the stock, and the difference comes down to this:

1. The market price of the stock is determined at the time of the grant, and; 2. The market price of the stock is determined at the time the RSUs vest.

If there’s a one-time grant that is given immediately, the two values are usually going to be very close. But if the grant vests over some number of years (e.g. four year schedule, 25% vests after one year, remaining 75% vests monthly), the difference between the two methods can differ greatly.

When the price is determined at grant time, employees benefit from the stock rising, and are penalized if the stock falls. When the price is determined at vesting time, employees end up with the same compensation no matter what the stock does, they only benefit from appreciation if they hold the stock and it appreciates after vesting.

In your company, do the bonus RSUs have a vesting schedule? Or are they granted and distributed shortly thereafter?

In my company there are multiple important days:

1) Find out RSU bonus value: "you get 20% of your salary worth of RSUs"

2) Grant Date: Company Calculates the number of RSUs, issues them, and starts Vesting schedule.

3) Vesting days: Some of the RSUs become vested and can be sold by the employee.

>The market price of the stock is determined at the time the RSUs vest.

What is the point of giving stock priced on the vesting day? It has no chance to go up or down between the grant and vesting date when it is sellable.

It would be the same as a cash bonus with an X year delay.

> What is the point of giving stock priced on the vesting day? It has no chance to go up or down between the grant and vesting date when it is sellable. It would be the same as a cash bonus with an X year delay.

An excellent question, somewhat epitomized by the late Mitch Hedberg’s joke: “I think a gift certificate is a bad gift. You take money that is good everywhere…” Same here, it’s no better than cash, only it’s a PITA to convert it to cash if you want cash.

That being said, there are a few scenarios I have seen that fit the pattern:

1. Some companies have an ESPP program where some cash is deducted from each pay and placed in escrow. At regular intervals, the accumulated money is turned into shares at market value, and the employee receives the shares. There is usually a modest discount involved, e.g. 15%. If the employee sells the day the shares vest, they harvest 15% of the value less taxes. Or the employee can HODL, as they see fit.

Even without a discount, some employees may prefer an ESPP to making their own investments in the company stock. There is the convenience of having the money deducted at source, many people find that an easier way to save than relying on discipline.

2. The company is cash-poor and pays some comp in stock because they have shares in their treasury. One can understand why some companies would want to do this, without agreeing that employees would prefer this to cash.

I think RSUs are better than cash. In the UK I have a choice, take my bonus as cash and pay a hefty amount for of tax, or take the same pre tax amount as RSUs hold it for a minimum 5 years so that it’s tax free.

I don't think that's correct -- everything I can find online says that in the UK you pay income tax on RSU's no matter how long you hold them.

The only technicality is whether they're "subject to forfeiture" in which case you pay the tax after 5 years, or not, in which case you pay the tax upon vesting.

But no matter what you're always paying income tax. You may not be as aware of it though, since the company that grants you the RSU's will generally sell a portion of them in order to cover your taxes before you even receive them. (That is standard in the US too -- e.g. 50 units vest but only ~32 show up in your brokerage account.)

Not Amazon, but when I receive RSUs it is denominated in the dollar amount. In a year when the first part vests the dollars are converted to stock units based on the price at that moment. Thus I do not know how many units of stock I am receiving until the first vesting event, because I don't know what the price will be in a year.

That... is truly bizarre. I've literally never heard of that before.

The entire point of RSU's (or stock options) is that if the company increases in value over time, e.g. over your first year, so does the cash value of your RSU's. That employees benefit as the company benefits.

What you're describing is zero benefit at all. It's no different from just being granted cash that vests. It's such a strange and seemingly pointless thing to do, that I have to ask -- are you sure that's how it works? And if so, has someone from the company ever explained why they do that?

That makes no sense at all. Why not just give you cash with an X year delay.

I have 4 year vesting period. After the first vest the following vests start to be denominated in stock units.

I think the advantage for company is somewhat better predictability?

That sounds absolutely bizarre. Why do stock the first year at all? I have never heard of anyone trying that before.

edit: That setup is basically saying "you don't benefit from the increase in share value for the first year of employement", which is pretty employee-hostile. I bet a company that was doing this before stopped doing it this year, when their stock value fell by a lot. :)

I've not heard that either, but maybe they do it because it's cheaper? Stock reserved for RSU grants doesn't cost companies cash in the same way that a direct monetary bonus would.

You've not been incentivized to increase the stock price, this is poorly designed and only serves to keep you locked in

RSUs are always granted as a number of shares. It's kind of the point of them, so the employee benefits from stock appreciation since their hire date.

However, in offer paperwork, it will sometimes be stated as a dollar value. This is for two reasons: the first is that RSUs need to be approved by the board at a meeting, which can happen some time after the hire date, at which time the dollar value is converted into shares.

But the main reason is that it makes it easier for the candidate to understand the value of the RSUs, and lets the company then talk about the total compensation and try to treat RSUs like cash in that discussion.

Since there are comments saying things like "I've never seen them based on dollar value":

My well known company has always granted stocks based on dollar value. Many employees incorrectly thought it was "number of shares", but if anyone actually asked the manager who decided how many shares they would get, the answer was always "We're given a dollar budget in shares to allocate amongst our reports - the system then converts that dollar amount into shares based on the stock price at the time."

So if our company has always done it this way, I suspect many others also do it this way.

I think people in this thread might be talking past each other.

I get a manager could be told “you have $500k of 4 year grants to give out this year”. He tells an employee “you’re getting a $100k 4 year grant.” Stock is $100 today, so that’s 1,000 shares, or 250 per year.

A year passes. Stock goes to $50. Here’s my big question: Are they still getting 250 shares this year from that grant (now with a value of $12,500) or are they getting $25,000 which is now 500 shares?

The first one is what I mean by it being set in stock and it’s the only thing I’ve seen. I get that it was calculated in dollars at the beginning, for budgeting purposes.

Something in between is what I think Coinbase and Stripe are doing, which is 1 year grants. I think they’re still frozen to number of shares at the beginning of the year (even if it’s calculated in dollars).

Ah I get it. Yes, even in my company, it would still be 250 shares.

I think some of the confusion is from somebody claiming they are granted RSU's based on dollar value, and then that dollar value is converted to shares at the 1-year vesting cliff. That is incredibly weird.

Offer letters having dollar values for the share grant at the time is normalish.

Yes, a place I'm familiar with gives you a dollar amount. At RSU distribution time (i.e. when you actually receive them, not at offer-time), you will receive that dollar amount of shares, regardless of each share's value. TBH I'm not sure why they structure it this way (maybe fewer taxes than payroll? or looks better on a balance sheet, somehow?).

One possible reason is that they can pretend it’s not costing them anything when they report “adjusted” earnings.

I’ve only seen them fixed. That part of your comp is variable, tied to the success of the company

I've never seen them assigned a dollar value (actually, in one case: SpaceX, which also had a 5 year vesting schedule instead of a standard 4 year). That would defeat the purpose of RSUs.

How would it defeat the purpose of RSUs?

If you get 100k USD worth of RSUs on start date, and the stock value goes up 10X you still have a lot of skin in the game.

Because you don't get RSUs on the start date, you get them as they vest over years.

If the stock goes up 10x in 4 years, then your grant on year 4 is still 100k, not 10x that.