Why do public companies give rsus instead of just high salaries like Netflix? I know they can print new stock, but if they need to do stock buy backs to even it out, why not just pay more in base salary and cut out the extra steps?
It's a nice way to put some fluffy golden handcuffs on you so you won't complain when they forget the lube.
High salary or bonus would do the same. With even vesting only the upcoming year holds you around. I don’t think this actually pans out.
For companies with skewed vesting schedules this is true (looking at you, AMZN). For other companies, not so much.
Most public companies do not give rsu. It's a motivator and a better deal for most people considering their growth rates.
That assumes the stock is going up.
Of course. Your salary is also an assumption you won't get fired. It's all risk evaluation at the end of the day and this practice is what has made people from the area (early tech giants employees) extremely wealthy.
People are more accepting of a decrease in TC than a decrease in salary. It's an easy and automatic way of lowering pay when the company does poorly, without people getting too upset. When NFLX stops growing, you can bet they'll start slashing pay pretty aggressively, and people won't be happy about it.
Agree to the first point but not to the second. Netflix’s pay philosophy is targeted to getting the best talent, and the reason and they didn’t cut pay even during the previous recession.
Any money allocated in to the options pool is effectively tax deferred income as well.
It’s about as close as a company can get to having its employees put a little skin in the game. So it’s mostly a benefit to the company, but employees can do well too.
Ppl don’t complain when stock tears it up & TC starts going through roof. As soon as stock tanks everyone would start cribbing about impact on TC. It’s all about part ownership in company success and do your part to help company grow & in return get benefits from stock upside.
Retention
Retention is only part of the story. Company isn’t interested in retaining sub-par performers. They are interested in extracting as much value from each person as possible, and giving lots of RSUs incentivizes people to work to create more value.
When the company is not doing well, you need to cut down costs. Now imagine having a script that automatically does that for you, and at the same time gives you a reason to say "well, it's not my fault, my hands are tied" and have your employees blame the economy. It would be fucking amazing
Equity based compensation has always been used to try to align the goals of the company with the goals of the employee. You have a vested interest in the company beyond a salary and when the company and shareholders win you win. Tech leveraged their high growth nature to attract risk takers and entrepreneurial spirits in the hopes of reaping big rewards. Equity based compensation in and of itself isn’t really anything new for highly compensated and influential employees within an organization. Even ICs fall under this umbrella within tech. What is new though is the usage of RSUs over traditional stock options. That industry shift is still somewhat new in the grand scheme of things. Here’s a good article for further reading. https://radford.aon.com/insights/articles/2014/Are-Restricted-Stock-Units-Right-For-You
”You have a vested interest in the company beyond a salary and when the company and shareholders win you win.” ^ and, when the company loses, you lose — so also disincentives leaks, etc.
Exactly right. And the more they can get you thinking about the stock price the more they hope you’ll make decisions around that metric. The mindset of an executive/officer. And right or wrong that’s the goal and duty the company has to its shareholders. You can debate the effectiveness of these programs particularly when the companies are so massive. But I can admit I care more about quarterly results, growth metrics, and stock price now then 10+ years ago when I just had a little fixed salary.
Tech Industry
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Worried that our top performer is an attrition risk. How do managers handle this?
AMA
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I’m a professional coaster AMA
Tech Industry
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Avoid teams with only Chinese or Indians especially with a Chinese/Indian manager
Tech Industry
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Are VPs dumb or they have different skills that I don't
Tax evasion and aligning the company and employees interests.
Can you explain more on the tax side?
Capital gains is often taxed differently to income. By spreading your pay over your different tax allowances you reduce your total tax burden. In the US you need to keep the stock two years to maximize this.