Re:We need to rethink employee compensation
by areyousure on Wednesday June 24, 2015 @11:20PM
(#9775738)
When an option vests today with a fair market value from four years ago, the company has "literally created income" for the employee. But for whatever reason, this isn't a taxable event. I was inquiring as to the reason for this difference in treatment.
Options at the money are also incredibly valuable, and even more so when they're for a startup (hence their usage in compensation). It's instructive to look at the prices for at-the-money options on, say, GOOG 1--2 years out to see how much they're worth on the open market (easily 10% of the current stock price).
Replacing vesting with options artificially discounted to the FMV of the company at hire might not be different fundamentally from vesting, but it seems like there's lots of ways to abuse the capability of issuing discounted options.