1:1 salary and stock jobs?

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Picasso
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1:1 salary and stock jobs?

Post by Picasso » Tue May 26, 2020 8:31 am

I sometimes see posts where people (I’m presuming in tech) have positions that pay close to 1:1 salary and stock (e.g. $150k salary and $100-150k stock).

What types of positions are these and at what types of companies?

The cash compensation portion indicates to me that most of are not senior or exec level yet.

knowledge
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Re: 1:1 salary and stock jobs?

Post by knowledge » Tue May 26, 2020 9:13 am

Typically, your variable comp rises the more senior you get. The CEO of a public company will most likely have the majority of her compensation tied to the stock. The most jr. employee of the same company will likely have none. It isn't a linear sliding scale, but generally that's how it works.

Anyone who is listing their stock based compensation equal to their base salary is likely quite senior.

simas
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Re: 1:1 salary and stock jobs?

Post by simas » Tue May 26, 2020 9:19 am

any position in most companies if you are high enough , i.e. my experience megacorps do it for their middle/senior management layer.

also, it is typically more complicated vs what you describe
- instead of 'stock' it could be RSUs, options, or both
- they are typically granted with vesting schedule as their are part of engagement/retention tools so first year you start lower than 1:1 and it takes up by 3rd or 4th year.
- comp package is many things which may include base pay, annual bonus (depending on the level typically bonus pool is funding as percentage of base pay times company wide metric like EPS and then assigned at the whim of the management team), and equity comp.

so overall comp for someone who is multiple years in could be 1:1, 1:0.2, 1:2 , or whatever (depending on stock performance over time which is the point behind this to align interests and retain talent). these jobs (again my experience) are all high demand, high stress, very high burnout type of positions where you rarely last more than few years with very heavy political (office politics related to management team changes, reorgns, alignments, etc) gameplay.

HEDGEFUNDIE
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Re: 1:1 salary and stock jobs?

Post by HEDGEFUNDIE » Tue May 26, 2020 9:21 am

Here are the midpoint base salaries for my SF based tech company.

Sr. Analyst: 100k
Manager: 145k
Sr. Manager: 180k
Director: 220k
Sr. Director: 260k

On top of this, software engineers are granted shares worth 300 - 400% of their base salary when they join, vesting over four years. With stock appreciation, the $ amount of the shares vesting annually can equal or exceed their base salary.

In addition to the stock you get at joining, you would also get “refresher” grants every six to twelve months. The rationale for this is so your stocks don’t “run out” at the end of the initial four year grant. But it also has the effect of layering on even more compensation in those first four years.

Non-software engineers also get stock, but at a much lower rate. I work in a business function and when I joined I received only 80% of my base salary as stock (vesting over four years, so 20% of my salary in stock vesting per year). But with refreshers and stock appreciation my annual vesting stock is now close to 80% of my base salary, which itself has increased around 10% per year.

All of this is standard across Silicon Valley, except that many companies will substitute a cash bonus for some of the stock. Total compensation will be equivalent however.

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Re: 1:1 salary and stock jobs?

Post by calvin+hobbes » Tue May 26, 2020 10:07 am

So let’s say you are due 150k in vested stock for a given year. Do you simply receive the number of shares that corresponds to that compensation on that specific date and then you’re on your own to decide to hold, sell, etc.? Does the share price that day become your basis? Do most employees “buy and hold” their vested shares or cash out and diversify? Seems like you would be making a bet of sorts on your company performance either way.

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Re: 1:1 salary and stock jobs?

Post by simplesimon » Tue May 26, 2020 10:14 am

calvin+hobbes wrote:
Tue May 26, 2020 10:07 am
So let’s say you are due 150k in vested stock for a given year. Do you simply receive the number of shares that corresponds to that compensation on that specific date and then you’re on your own to decide to hold, sell, etc.? Does the share price that day become your basis? Do most employees “buy and hold” their vested shares or cash out and diversify? Seems like you would be making a bet of sorts on your company performance either way.
For RSU you're due a number of shares, not dollar amount. Yes, yes, don't know.

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Re: 1:1 salary and stock jobs?

Post by Jack FFR1846 » Tue May 26, 2020 10:18 am

Companies change this stuff all the time. Let me place us 10 years ago and I'll name names. These are semi manufacturers and the job is for field applications engineer.

Linear Technology is legend in profit sharing. In one year, payout was 125% of salary and was for every employee in the company. Salary is lower than average for the position by 25%
Maxim is similar to the above, but more in quarterly bonuses to meeting MBOs. Both lower salary and high payout.

The other end of the spectrum was both Texas Instruments and Analog Devices, who were known for paying a ton in salary and less in bonuses. A good year at TI found profit sharing at 10% of salary. There were also quarterly bonuses based on constantly changing metrics (sometimes even within the quarter).

Less well known were Fairchild, which offered both a high salary and high bonus.
Semtech offered high salary and through the roof stock options and they absolutely gamed the system. They also paid the most for a car plan of anyone in the industry.

The distributors back then were in a war to find talent and pushed both salary and commission (FAEs were paid commissions on their focus customers and focus lines for registerable parts).

Some of the smaller companies and upstarts paid outrageous numbers for both salary and options (one offered me double my salary plus stock options). Most of these companies were bought by one of the big boys and the huge compensation went away.

If your job falls into a slot that pays large bonuses, you already know this and you can easily find out who pays what by acting a head hunter. All of the above companies have changed how they pay in the last decade. Many have been gobbled up or merged (Fairchild and ON, LT and ADI).
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Re: 1:1 salary and stock jobs?

Post by mak1277 » Tue May 26, 2020 10:27 am

calvin+hobbes wrote:
Tue May 26, 2020 10:07 am
So let’s say you are due 150k in vested stock for a given year. Do you simply receive the number of shares that corresponds to that compensation on that specific date and then you’re on your own to decide to hold, sell, etc.? Does the share price that day become your basis? Do most employees “buy and hold” their vested shares or cash out and diversify? Seems like you would be making a bet of sorts on your company performance either way.
The value estimation is done at the grant date, not at the vesting date. So if your company is targeting a $150k annual equity award, that calculation will be done when the shares are granted. The ultimate value of the award won't be known until the vesting period is over.

I am a VP & department head at a F1000 company. My target comp is broken out as follows: 35% base salary, 27% bonus, 38% equity. Now my company has performed really well, so in 2019, my actual comp was more like 83% equity, 10% base salary, 7% bonus.

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Re: 1:1 salary and stock jobs?

Post by HEDGEFUNDIE » Tue May 26, 2020 10:29 am

calvin+hobbes wrote:
Tue May 26, 2020 10:07 am
So let’s say you are due 150k in vested stock for a given year. Do you simply receive the number of shares that corresponds to that compensation on that specific date and then you’re on your own to decide to hold, sell, etc.? Does the share price that day become your basis? Do most employees “buy and hold” their vested shares or cash out and diversify? Seems like you would be making a bet of sorts on your company performance either way.
Let’s say when I joined my company I received a $100k stock grant vesting over four years. And let’s say the stock price on my start date was $100. On my start date, my $100k grant is converted into 1,000 shares vesting over four years.

At the end of year 1, I vest 250 shares. The stock price has gone up to $200. My equity compensation for the first year ends up at $50k, instead of the original expected $25k. And my future expected equity compensation is now $50k/year (ignoring refreshers).

Technically the basis on your vesting shares is zero, and you have to immediately pay STCG tax on the entire vest amount. After that you can do whatever you’d like with the shares.

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Re: 1:1 salary and stock jobs?

Post by HEDGEFUNDIE » Tue May 26, 2020 10:34 am

mak1277 wrote:
Tue May 26, 2020 10:27 am
calvin+hobbes wrote:
Tue May 26, 2020 10:07 am
So let’s say you are due 150k in vested stock for a given year. Do you simply receive the number of shares that corresponds to that compensation on that specific date and then you’re on your own to decide to hold, sell, etc.? Does the share price that day become your basis? Do most employees “buy and hold” their vested shares or cash out and diversify? Seems like you would be making a bet of sorts on your company performance either way.
The value estimation is done at the grant date, not at the vesting date. So if your company is targeting a $150k annual equity award, that calculation will be done when the shares are granted. The ultimate value of the award won't be known until the vesting period is over.

I am a VP & department head at a F1000 company. My target comp is broken out as follows: 35% base salary, 27% bonus, 38% equity. Now my company has performed really well, so in 2019, my actual comp was more like 83% equity, 10% base salary, 7% bonus.
If I did the math correctly, your actual comp ended up at 3.3x your market comp? Talk about golden handcuffs!

mak1277
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Re: 1:1 salary and stock jobs?

Post by mak1277 » Tue May 26, 2020 10:36 am

HEDGEFUNDIE wrote:
Tue May 26, 2020 10:34 am
mak1277 wrote:
Tue May 26, 2020 10:27 am
calvin+hobbes wrote:
Tue May 26, 2020 10:07 am
So let’s say you are due 150k in vested stock for a given year. Do you simply receive the number of shares that corresponds to that compensation on that specific date and then you’re on your own to decide to hold, sell, etc.? Does the share price that day become your basis? Do most employees “buy and hold” their vested shares or cash out and diversify? Seems like you would be making a bet of sorts on your company performance either way.
The value estimation is done at the grant date, not at the vesting date. So if your company is targeting a $150k annual equity award, that calculation will be done when the shares are granted. The ultimate value of the award won't be known until the vesting period is over.

I am a VP & department head at a F1000 company. My target comp is broken out as follows: 35% base salary, 27% bonus, 38% equity. Now my company has performed really well, so in 2019, my actual comp was more like 83% equity, 10% base salary, 7% bonus.
If I did the math correctly, your actual comp ended up at 3.3x your market comp? Talk about golden handcuffs!
Roughly, yeah....I fudged some of the numbers but it was definitely over 3x. The last 3 or 4 years have drastically impacted my plans for early retirement.

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Re: 1:1 salary and stock jobs?

Post by damnford » Tue May 26, 2020 10:38 am

HEDGEFUNDIE wrote:
Tue May 26, 2020 10:29 am
Technically the basis on your vesting shares is zero, and you have to immediately pay STCG tax on the entire vest amount. After that you can do whatever you’d like with the shares.
Hmm, are you sure that's true? It certainly isn't for the RSUs at my tech company. Your basis is whatever price the shares cost the day they vest (minus $20 or so for a transaction fee). So if you sell immediately, you owe zero capital gains. The whole vesting dollar amount is treated as normal W-2 income and taxes are withheld from it (or you have to pay the tax in cash) of course, but that's true whether you sell or not. You'll only owe capital gains if you decide to hold on to the actual shares and they go up in value.

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Re: 1:1 salary and stock jobs?

Post by zrail » Tue May 26, 2020 10:40 am

damnford wrote:
Tue May 26, 2020 10:38 am
HEDGEFUNDIE wrote:
Tue May 26, 2020 10:29 am
Technically the basis on your vesting shares is zero, and you have to immediately pay STCG tax on the entire vest amount. After that you can do whatever you’d like with the shares.
Hmm, are you sure that's true? It certainly isn't for the RSUs at my tech company. Your basis is whatever price the shares cost the day they vest (minus $20 or so for a transaction fee). So if you sell immediately, you owe zero capital gains. The whole vesting dollar amount is treated as normal W-2 income and taxes are withheld from it (or you have to pay the tax in cash) of course, but that's true whether you sell or not. You'll only owe capital gains if you decide to hold on to the actual shares and they go up in value.
Same here. RSUs are treated as ordinary W2 income on vest date and have federal, state, local, Social Security and Medicare withholding applied as if they were a cash bonus. The company will sell enough to cover this withholding by default. I believe there's an option to let you take all the shares and pay the taxes in cash as well.
Last edited by zrail on Tue May 26, 2020 10:41 am, edited 1 time in total.

HEDGEFUNDIE
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Re: 1:1 salary and stock jobs?

Post by HEDGEFUNDIE » Tue May 26, 2020 10:40 am

damnford wrote:
Tue May 26, 2020 10:38 am
HEDGEFUNDIE wrote:
Tue May 26, 2020 10:29 am
Technically the basis on your vesting shares is zero, and you have to immediately pay STCG tax on the entire vest amount. After that you can do whatever you’d like with the shares.
Hmm, are you sure that's true? It certainly isn't for the RSUs at my tech company. Your basis is whatever price the shares cost the day they vest (minus $20 or so for a transaction fee). So if you sell immediately, you owe zero capital gains. The whole vesting dollar amount is treated as normal W-2 income and taxes are withheld from it (or you have to pay the tax in cash) of course, but that's true whether you sell or not. You'll only owe capital gains if you decide to hold on to the actual shares and they go up in value.
Yeah my language was not precise. You pay the equivalent of STCG on the full stock vest amount immediately. It’s just categorized as income instead of CG.
Last edited by HEDGEFUNDIE on Tue May 26, 2020 10:42 am, edited 1 time in total.

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calvin+hobbes
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Re: 1:1 salary and stock jobs?

Post by calvin+hobbes » Tue May 26, 2020 10:42 am

As a physician, this is all very fascinating. Thanks for the replies. My compensation is quite a bit more simple... 100% productivity based (exams, surgeries, procedures).

The examples so far really seem to have turned out quite favorably. Is there any sort of hedge against poor company performance aside from jumping ship?

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Re: 1:1 salary and stock jobs?

Post by TomatoTomahto » Tue May 26, 2020 10:42 am

knowledge wrote:
Tue May 26, 2020 9:13 am
Typically, your variable comp rises the more senior you get. The CEO of a public company will most likely have the majority of her compensation tied to the stock. The most jr. employee of the same company will likely have none. It isn't a linear sliding scale, but generally that's how it works.

Anyone who is listing their stock based compensation equal to their base salary is likely quite senior.
My wife thanks you for “the majority of her compensation tied to the stock.”

She is not the CEO, but her compensation has become more and more RSU based over the years. Her immediate cash compensation has increased, but slowly.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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Re: 1:1 salary and stock jobs?

Post by TomatoTomahto » Tue May 26, 2020 10:44 am

HEDGEFUNDIE wrote:
Tue May 26, 2020 10:40 am
damnford wrote:
Tue May 26, 2020 10:38 am
HEDGEFUNDIE wrote:
Tue May 26, 2020 10:29 am
Technically the basis on your vesting shares is zero, and you have to immediately pay STCG tax on the entire vest amount. After that you can do whatever you’d like with the shares.
Hmm, are you sure that's true? It certainly isn't for the RSUs at my tech company. Your basis is whatever price the shares cost the day they vest (minus $20 or so for a transaction fee). So if you sell immediately, you owe zero capital gains. The whole vesting dollar amount is treated as normal W-2 income and taxes are withheld from it (or you have to pay the tax in cash) of course, but that's true whether you sell or not. You'll only owe capital gains if you decide to hold on to the actual shares and they go up in value.
Yeah my language was not precise. You pay the equivalent of STCG on the full stock vest amount immediately. It’s just categorized as income instead of CG.
I think of RSUs as “lumpy salary.” Makes selling it as soon as legal when it vests more a matter of course.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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Re: 1:1 salary and stock jobs?

Post by HEDGEFUNDIE » Tue May 26, 2020 10:47 am

calvin+hobbes wrote:
Tue May 26, 2020 10:42 am
As a physician, this is all very fascinating. Thanks for the replies. My compensation is quite a bit more simple... 100% productivity based (exams, surgeries, procedures).

The examples so far really seem to have turned out quite favorably. Is there any sort of hedge against poor company performance aside from jumping ship?
Most companies don’t allow you to hedge your own company stock.

If the value of your total compensation falls below your market value you are free to jump ship. But as you can see from the examples in this thread most people have the opposite problem - their total comp has increased well beyond what any other company would reasonably be able to match.

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Re: 1:1 salary and stock jobs?

Post by calvin+hobbes » Tue May 26, 2020 1:06 pm

HEDGEFUNDIE wrote:
Tue May 26, 2020 10:47 am
calvin+hobbes wrote:
Tue May 26, 2020 10:42 am
As a physician, this is all very fascinating. Thanks for the replies. My compensation is quite a bit more simple... 100% productivity based (exams, surgeries, procedures).

The examples so far really seem to have turned out quite favorably. Is there any sort of hedge against poor company performance aside from jumping ship?
Most companies don’t allow you to hedge your own company stock.

If the value of your total compensation falls below your market value you are free to jump ship. But as you can see from the examples in this thread most people have the opposite problem - their total comp has increased well beyond what any other company would reasonably be able to match.
Well surely there are some tech companies that perform worse than expectations and stock units become less valuable than initially thought? Just wondering if there was a way for employees to protect themselves in that situation.

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Re: 1:1 salary and stock jobs?

Post by sailaway » Tue May 26, 2020 1:09 pm

calvin+hobbes wrote:
Tue May 26, 2020 1:06 pm
HEDGEFUNDIE wrote:
Tue May 26, 2020 10:47 am
calvin+hobbes wrote:
Tue May 26, 2020 10:42 am
As a physician, this is all very fascinating. Thanks for the replies. My compensation is quite a bit more simple... 100% productivity based (exams, surgeries, procedures).

The examples so far really seem to have turned out quite favorably. Is there any sort of hedge against poor company performance aside from jumping ship?
Most companies don’t allow you to hedge your own company stock.

If the value of your total compensation falls below your market value you are free to jump ship. But as you can see from the examples in this thread most people have the opposite problem - their total comp has increased well beyond what any other company would reasonably be able to match.
Well surely there are some tech companies that perform worse than expectations and stock units become less valuable than initially thought? Just wondering if there was a way for employees to protect themselves in that situation.
No more than a teacher can protect themselves from furloughs.

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Re: 1:1 salary and stock jobs?

Post by milktoast » Tue May 26, 2020 1:11 pm

calvin+hobbes wrote:
Tue May 26, 2020 1:06 pm
Well surely there are some tech companies that perform worse than expectations and stock units become less valuable than initially thought? Just wondering if there was a way for employees to protect themselves in that situation.
Not really. Hedging on your company stock is usually grounds for immediate termination.

But tech has a lot of fluidity in jobs. If your company is down or flat, it's not uncommon to move companies every 2-4 years. Better luck next time.

And even if the stock is on a rise, it really only locks you for about three years. Unless you are a key contributor and get big refreshes.

To a certain extent, it's about expected value. A big stable company with stable stock price will pay higher salary/bonus/RSU than a smaller company with tons of upside. But if you have a 1 in 4 chance of getting 4x the total comp over four years, the expected value is the same.

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Re: 1:1 salary and stock jobs?

Post by HEDGEFUNDIE » Tue May 26, 2020 1:15 pm

calvin+hobbes wrote:
Tue May 26, 2020 1:06 pm
HEDGEFUNDIE wrote:
Tue May 26, 2020 10:47 am
calvin+hobbes wrote:
Tue May 26, 2020 10:42 am
As a physician, this is all very fascinating. Thanks for the replies. My compensation is quite a bit more simple... 100% productivity based (exams, surgeries, procedures).

The examples so far really seem to have turned out quite favorably. Is there any sort of hedge against poor company performance aside from jumping ship?
Most companies don’t allow you to hedge your own company stock.

If the value of your total compensation falls below your market value you are free to jump ship. But as you can see from the examples in this thread most people have the opposite problem - their total comp has increased well beyond what any other company would reasonably be able to match.
Well surely there are some tech companies that perform worse than expectations and stock units become less valuable than initially thought? Just wondering if there was a way for employees to protect themselves in that situation.
I suppose you could buy a put option on a niche ETF that holds your company stock and also other highly correlated stocks in the same niche, and that wouldn't technically violate any company rules.

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Re: 1:1 salary and stock jobs?

Post by simas » Tue May 26, 2020 1:17 pm

calvin+hobbes wrote:
Tue May 26, 2020 1:06 pm
HEDGEFUNDIE wrote:
Tue May 26, 2020 10:47 am
calvin+hobbes wrote:
Tue May 26, 2020 10:42 am
As a physician, this is all very fascinating. Thanks for the replies. My compensation is quite a bit more simple... 100% productivity based (exams, surgeries, procedures).

The examples so far really seem to have turned out quite favorably. Is there any sort of hedge against poor company performance aside from jumping ship?
Most companies don’t allow you to hedge your own company stock.

If the value of your total compensation falls below your market value you are free to jump ship. But as you can see from the examples in this thread most people have the opposite problem - their total comp has increased well beyond what any other company would reasonably be able to match.
Well surely there are some tech companies that perform worse than expectations and stock units become less valuable than initially thought? Just wondering if there was a way for employees to protect themselves in that situation.
Not really, that is the whole point (so called 'alignment of interest') - you eat what you cook. if owners/shareholders of the company are not doing well, why should you as employee?

and , again - nothing here is restricted to tech, tech just happen to be booming last two decades. it is more about competition for talent and emerging vs mature industries. as industries emerge, the cool new thing become normal , people rush in, and salaries adjust, expecting the same with FAANG (or whatever acronym soup it is now) and new industries boom and bust naturally be it gene therapy or some other edge fields we do not know about right now..

the best protection is to know your bets and manage them taking cash off the tables as needed. I worked for megacorp that had similar comp structures and worked primarily through RSUs, even a 5 digit grants over time grow to something if stock price 6X in 5 years. there are those who sold (paid off houses, retired, etc), and those you stayed on with roller coaster and were still working there when layoff wave came.

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Re: 1:1 salary and stock jobs?

Post by TomatoTomahto » Tue May 26, 2020 1:25 pm

HEDGEFUNDIE wrote:
Tue May 26, 2020 10:47 am
calvin+hobbes wrote:
Tue May 26, 2020 10:42 am
As a physician, this is all very fascinating. Thanks for the replies. My compensation is quite a bit more simple... 100% productivity based (exams, surgeries, procedures).

The examples so far really seem to have turned out quite favorably. Is there any sort of hedge against poor company performance aside from jumping ship?
Most companies don’t allow you to hedge your own company stock.

If the value of your total compensation falls below your market value you are free to jump ship. But as you can see from the examples in this thread most people have the opposite problem - their total comp has increased well beyond what any other company would reasonably be able to match.
In banking (our area of knowledge) and I have to assume most others, a potential new employer is expected to “buy you out” of your unvested RSUs. That can become cost prohibitive, where in many cases you have 3-4 years of almost-total comp in unvested RSUs. But, if they want you, they want you.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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calvin+hobbes
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Re: 1:1 salary and stock jobs?

Post by calvin+hobbes » Tue May 26, 2020 1:38 pm

simas wrote:
Tue May 26, 2020 1:17 pm
Not really, that is the whole point (so called 'alignment of interest') - you eat what you cook. if owners/shareholders of the company are not doing well, why should you as employee?

and , again - nothing here is restricted to tech, tech just happen to be booming last two decades. it is more about competition for talent and emerging vs mature industries. as industries emerge, the cool new thing become normal , people rush in, and salaries adjust, expecting the same with FAANG (or whatever acronym soup it is now) and new industries boom and bust naturally be it gene therapy or some other edge fields we do not know about right now..

the best protection is to know your bets and manage them taking cash off the tables as needed. I worked for megacorp that had similar comp structures and worked primarily through RSUs, even a 5 digit grants over time grow to something if stock price 6X in 5 years. there are those who sold (paid off houses, retired, etc), and those you stayed on with roller coaster and were still working there when layoff wave came.
Gotcha. It does blow my mind a bit because around here we preach diversification with investments. You could argue that when it comes to building wealth, investments are secondary to income generation and these compensation plans essentially tie income/compensation to the performance of a single company.

Again, it still seems like a "bet" one way or another. I think it would stress me out thinking about all the variables that can affect company stock price. I guess I would have to make peace with it since that's just how it goes. Glad to hear it works out quite well most of the time.

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Re: 1:1 salary and stock jobs?

Post by HEDGEFUNDIE » Tue May 26, 2020 2:11 pm

calvin+hobbes wrote:
Tue May 26, 2020 1:38 pm
simas wrote:
Tue May 26, 2020 1:17 pm
Not really, that is the whole point (so called 'alignment of interest') - you eat what you cook. if owners/shareholders of the company are not doing well, why should you as employee?

and , again - nothing here is restricted to tech, tech just happen to be booming last two decades. it is more about competition for talent and emerging vs mature industries. as industries emerge, the cool new thing become normal , people rush in, and salaries adjust, expecting the same with FAANG (or whatever acronym soup it is now) and new industries boom and bust naturally be it gene therapy or some other edge fields we do not know about right now..

the best protection is to know your bets and manage them taking cash off the tables as needed. I worked for megacorp that had similar comp structures and worked primarily through RSUs, even a 5 digit grants over time grow to something if stock price 6X in 5 years. there are those who sold (paid off houses, retired, etc), and those you stayed on with roller coaster and were still working there when layoff wave came.
Gotcha. It does blow my mind a bit because around here we preach diversification with investments. You could argue that when it comes to building wealth, investments are secondary to income generation and these compensation plans essentially tie income/compensation to the performance of a single company.

Again, it still seems like a "bet" one way or another. I think it would stress me out thinking about all the variables that can affect company stock price. I guess I would have to make peace with it since that's just how it goes. Glad to hear it works out quite well most of the time.
If you were given the choice between a $200k job that’s all based salary, and a $400k job that is half base half stock, are you saying you would take the former?

simas
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Re: 1:1 salary and stock jobs?

Post by simas » Tue May 26, 2020 2:15 pm

calvin+hobbes wrote:
Tue May 26, 2020 1:38 pm
simas wrote:
Tue May 26, 2020 1:17 pm
Not really, that is the whole point (so called 'alignment of interest') - you eat what you cook. if owners/shareholders of the company are not doing well, why should you as employee?

and , again - nothing here is restricted to tech, tech just happen to be booming last two decades. it is more about competition for talent and emerging vs mature industries. as industries emerge, the cool new thing become normal , people rush in, and salaries adjust, expecting the same with FAANG (or whatever acronym soup it is now) and new industries boom and bust naturally be it gene therapy or some other edge fields we do not know about right now..

the best protection is to know your bets and manage them taking cash off the tables as needed. I worked for megacorp that had similar comp structures and worked primarily through RSUs, even a 5 digit grants over time grow to something if stock price 6X in 5 years. there are those who sold (paid off houses, retired, etc), and those you stayed on with roller coaster and were still working there when layoff wave came.
Gotcha. It does blow my mind a bit because around here we preach diversification with investments. You could argue that when it comes to building wealth, investments are secondary to income generation and these compensation plans essentially tie income/compensation to the performance of a single company.

Again, it still seems like a "bet" one way or another. I think it would stress me out thinking about all the variables that can affect company stock price. I guess I would have to make peace with it since that's just how it goes. Glad to hear it works out quite well most of the time.
deal with this 'problem' of variable income over your base when you face it ;) . and yes, get a base you are happy with and assume the rest of zero is another strategy (you will only be surprised positively). what I seen work (and what worked for me) is converting such variable 'feast or famine' income into investments all without growing your expenses too much. 3-4 years of making that money without going crazy on expense and you are set for the rest of your normal life..

DaftInvestor
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Re: 1:1 salary and stock jobs?

Post by DaftInvestor » Tue May 26, 2020 2:44 pm

I've had jobs in the past which weren't expected to be 1:1 salary/stock jobs but simply became that way because the stock value rose so much during my time with the company that the options/RSUs/ESPP ended up being equal to my salary. Some of the folks that you refer to could be in that camp.

sailaway
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Re: 1:1 salary and stock jobs?

Post by sailaway » Tue May 26, 2020 3:02 pm

calvin+hobbes wrote:
Tue May 26, 2020 1:38 pm
simas wrote:
Tue May 26, 2020 1:17 pm
Not really, that is the whole point (so called 'alignment of interest') - you eat what you cook. if owners/shareholders of the company are not doing well, why should you as employee?

and , again - nothing here is restricted to tech, tech just happen to be booming last two decades. it is more about competition for talent and emerging vs mature industries. as industries emerge, the cool new thing become normal , people rush in, and salaries adjust, expecting the same with FAANG (or whatever acronym soup it is now) and new industries boom and bust naturally be it gene therapy or some other edge fields we do not know about right now..

the best protection is to know your bets and manage them taking cash off the tables as needed. I worked for megacorp that had similar comp structures and worked primarily through RSUs, even a 5 digit grants over time grow to something if stock price 6X in 5 years. there are those who sold (paid off houses, retired, etc), and those you stayed on with roller coaster and were still working there when layoff wave came.
Gotcha. It does blow my mind a bit because around here we preach diversification with investments. You could argue that when it comes to building wealth, investments are secondary to income generation and these compensation plans essentially tie income/compensation to the performance of a single company.

Again, it still seems like a "bet" one way or another. I think it would stress me out thinking about all the variables that can affect company stock price. I guess I would have to make peace with it since that's just how it goes. Glad to hear it works out quite well most of the time.
Diversity is why so many of us advise to sell it as soon as it vests and buy according to your normal plan.

Until RSUs vest, they are just play money. They are an incentive to stick around, and if you don't, they will usually vanish. Even if it is a layoff. At Megacorp, you can keep them if you officially retire, but there is an age limit for that, so it doesn't work for early retirees. We record the unvested value listed in our spreadsheet as a comment, not as a number to include in calculations.

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simplesimon
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Re: 1:1 salary and stock jobs?

Post by simplesimon » Tue May 26, 2020 3:28 pm

calvin+hobbes wrote:
Tue May 26, 2020 1:38 pm
simas wrote:
Tue May 26, 2020 1:17 pm
Not really, that is the whole point (so called 'alignment of interest') - you eat what you cook. if owners/shareholders of the company are not doing well, why should you as employee?

and , again - nothing here is restricted to tech, tech just happen to be booming last two decades. it is more about competition for talent and emerging vs mature industries. as industries emerge, the cool new thing become normal , people rush in, and salaries adjust, expecting the same with FAANG (or whatever acronym soup it is now) and new industries boom and bust naturally be it gene therapy or some other edge fields we do not know about right now..

the best protection is to know your bets and manage them taking cash off the tables as needed. I worked for megacorp that had similar comp structures and worked primarily through RSUs, even a 5 digit grants over time grow to something if stock price 6X in 5 years. there are those who sold (paid off houses, retired, etc), and those you stayed on with roller coaster and were still working there when layoff wave came.
Gotcha. It does blow my mind a bit because around here we preach diversification with investments. You could argue that when it comes to building wealth, investments are secondary to income generation and these compensation plans essentially tie income/compensation to the performance of a single company.

Again, it still seems like a "bet" one way or another. I think it would stress me out thinking about all the variables that can affect company stock price. I guess I would have to make peace with it since that's just how it goes. Glad to hear it works out quite well most of the time.
I'm not sure that it works "most" of the time. There's going to be bias on these forums compared to reality.

absolute zero
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Re: 1:1 salary and stock jobs?

Post by absolute zero » Tue May 26, 2020 4:12 pm

For most of these companies, are the RSA’s guaranteed unless you voluntarily resign prior to vesting? What happens if you are laid off, or let go due to lack of performance?

sailaway
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Re: 1:1 salary and stock jobs?

Post by sailaway » Tue May 26, 2020 4:15 pm

absolute zero wrote:
Tue May 26, 2020 4:12 pm
For most of these companies, are the RSA’s guaranteed unless you voluntarily resign prior to vesting? What happens if you are laid off, or let go due to lack of performance?
Usually, the RSUs are forfeit, unless layoffs have been carefully negotiated or you are eligible for retirement, even if this is the only retirement perk offered.

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Re: 1:1 salary and stock jobs?

Post by TomatoTomahto » Tue May 26, 2020 4:23 pm

absolute zero wrote:
Tue May 26, 2020 4:12 pm
For most of these companies, are the RSA’s guaranteed unless you voluntarily resign prior to vesting? What happens if you are laid off, or let go due to lack of performance?
IME, in mega banking anyway, if you resign (not retire, there are situations where a long term employee retains the RSUs) or are fired for cause, you lose the unvested RSUs. Generally, if you have resigned to go to another company, that new company will buy out your RSUs (if they’re a public company) with a vesting schedule that roughly matches that of your current employer.

Generally, In mega banks, laid off workers retain their RSUs.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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calvin+hobbes
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Re: 1:1 salary and stock jobs?

Post by calvin+hobbes » Tue May 26, 2020 5:21 pm

sailaway wrote:
Tue May 26, 2020 3:02 pm

Diversity is why so many of us advise to sell it as soon as it vests and buy according to your normal plan.


Until RSUs vest, they are just play money. They are an incentive to stick around, and if you don't, they will usually vanish. Even if it is a layoff. At Megacorp, you can keep them if you officially retire, but there is an age limit for that, so it doesn't work for early retirees. We record the unvested value listed in our spreadsheet as a comment, not as a number to include in calculations.
I think that is what I would do as well. Cheers

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calvin+hobbes
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Re: 1:1 salary and stock jobs?

Post by calvin+hobbes » Tue May 26, 2020 5:33 pm

HEDGEFUNDIE wrote:
Tue May 26, 2020 2:11 pm
If you were given the choice between a $200k job that’s all based salary, and a $400k job that is half base half stock, are you saying you would take the former?
Well that's not really a fair comparison though, is it? Obviously in that false dichotomy the 400k half and half job has all the upside and the same exact floor given both bases are 200k.

A better hypothetical might be 400k base salary vs. 400k half base, half stock. In that scenario you would have to decide between the upside or downside of the stock units versus the safety of the guaranteed base. What I am really getting at is the comparison between traditional employment compensation and tech compensation.

I understand if all of silicon valley functions similarly, there really is no actual choice for those in the industry but it is interesting to think about from an outsider's perspective nonetheless.

sailaway
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Re: 1:1 salary and stock jobs?

Post by sailaway » Tue May 26, 2020 5:38 pm

calvin+hobbes wrote:
Tue May 26, 2020 5:33 pm
HEDGEFUNDIE wrote:
Tue May 26, 2020 2:11 pm
If you were given the choice between a $200k job that’s all based salary, and a $400k job that is half base half stock, are you saying you would take the former?
Well that's not really a fair comparison though, is it? Obviously in that false dichotomy the 400k half and half job has all the upside and the same exact floor given both bases are 200k.

A better hypothetical might be 400k base salary vs. 400k half base, half stock. In that scenario you would have to decide between the upside or downside of the stock units versus the safety of the guaranteed base. What I am really getting at is the comparison between traditional employment compensation and tech compensation.

I understand if all of silicon valley functions similarly, there really is no actual choice for those in the industry but it is interesting to think about from an outsider's perspective nonetheless.
No one is offering the second choice; plenty of institutions are offering the first choice. For the same skill set, that is.

JD2775
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Re: 1:1 salary and stock jobs?

Post by JD2775 » Tue May 26, 2020 5:43 pm

HEDGEFUNDIE wrote:
Tue May 26, 2020 9:21 am
Here are the midpoint base salaries for my SF based tech company.

Sr. Analyst: 100k
Manager: 145k
Sr. Manager: 180k
Director: 220k
Sr. Director: 260k

On top of this, software engineers are granted shares worth 300 - 400% of their base salary when they join, vesting over four years. With stock appreciation, the $ amount of the shares vesting annually can equal or exceed their base salary.

In addition to the stock you get at joining, you would also get “refresher” grants every six to twelve months. The rationale for this is so your stocks don’t “run out” at the end of the initial four year grant. But it also has the effect of layering on even more compensation in those first four years.

Non-software engineers also get stock, but at a much lower rate. I work in a business function and when I joined I received only 80% of my base salary as stock (vesting over four years, so 20% of my salary in stock vesting per year). But with refreshers and stock appreciation my annual vesting stock is now close to 80% of my base salary, which itself has increased around 10% per year.

All of this is standard across Silicon Valley, except that many companies will substitute a cash bonus for some of the stock. Total compensation will be equivalent however.
Just out of curiosity, is that "Sr Analyst" referring to Business or Data?

fortunefavored
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Re: 1:1 salary and stock jobs?

Post by fortunefavored » Tue May 26, 2020 5:57 pm

sailaway wrote:
Tue May 26, 2020 5:38 pm
calvin+hobbes wrote:
Tue May 26, 2020 5:33 pm
HEDGEFUNDIE wrote:
Tue May 26, 2020 2:11 pm
If you were given the choice between a $200k job that’s all based salary, and a $400k job that is half base half stock, are you saying you would take the former?
Well that's not really a fair comparison though, is it? Obviously in that false dichotomy the 400k half and half job has all the upside and the same exact floor given both bases are 200k.

A better hypothetical might be 400k base salary vs. 400k half base, half stock. In that scenario you would have to decide between the upside or downside of the stock units versus the safety of the guaranteed base. What I am really getting at is the comparison between traditional employment compensation and tech compensation.

I understand if all of silicon valley functions similarly, there really is no actual choice for those in the industry but it is interesting to think about from an outsider's perspective nonetheless.
No one is offering the second choice; plenty of institutions are offering the first choice. For the same skill set, that is.
Yes, everyone would prefer cash. It doesn't exist. I'd also add (in addition to Hedgefundie's ranges, which seem spot-on for top tech companies) you tend to get a lot of extra money that isn't obvious - generous employee stock purchase programs and all sorts of other benefits and compensation that add to your bottom line.

FANGM+ have effective monopolies, strong pricing power, and a lot of wind in their sails. It is a no brainer if you can get in and stay in.

I'd guess over 5 years, it will easily be 2 to 5X total compensation of what you'd get some where private or small company.

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Re: 1:1 salary and stock jobs?

Post by HawkeyePierce » Tue May 26, 2020 6:11 pm

RSUs are about 45% of my compensation right now. I'm a software engineer at a major tech company. $155k salary, $31k target bonus (variable), $150k RSUs at present FMV.

In tech your cash comp caps out pretty quickly. I'm unlikely to break $200k in salary, but my RSU target value could easily double over the next few years. So, as I climb the career ladder, I'll move away from 1:1 cash:stock and closer to 1:2.

I always sell immediately after vesting. In fact now we're allowed to file irrevocable sell-all elections at the start of each year so that our shares are automatically sold and we just get cash in our accounts. Sometimes that's worked in my favor, sometimes it hasn't. One takes one's chances.

HEDGEFUNDIE
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Re: 1:1 salary and stock jobs?

Post by HEDGEFUNDIE » Tue May 26, 2020 7:28 pm

JD2775 wrote:
Tue May 26, 2020 5:43 pm
HEDGEFUNDIE wrote:
Tue May 26, 2020 9:21 am
Here are the midpoint base salaries for my SF based tech company.

Sr. Analyst: 100k
Manager: 145k
Sr. Manager: 180k
Director: 220k
Sr. Director: 260k

On top of this, software engineers are granted shares worth 300 - 400% of their base salary when they join, vesting over four years. With stock appreciation, the $ amount of the shares vesting annually can equal or exceed their base salary.

In addition to the stock you get at joining, you would also get “refresher” grants every six to twelve months. The rationale for this is so your stocks don’t “run out” at the end of the initial four year grant. But it also has the effect of layering on even more compensation in those first four years.

Non-software engineers also get stock, but at a much lower rate. I work in a business function and when I joined I received only 80% of my base salary as stock (vesting over four years, so 20% of my salary in stock vesting per year). But with refreshers and stock appreciation my annual vesting stock is now close to 80% of my base salary, which itself has increased around 10% per year.

All of this is standard across Silicon Valley, except that many companies will substitute a cash bonus for some of the stock. Total compensation will be equivalent however.
Just out of curiosity, is that "Sr Analyst" referring to Business or Data?
It's a role level, not a functional indicator. It could be an HR Sr Analyst.

HEDGEFUNDIE
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Re: 1:1 salary and stock jobs?

Post by HEDGEFUNDIE » Tue May 26, 2020 7:30 pm

sailaway wrote:
Tue May 26, 2020 5:38 pm
calvin+hobbes wrote:
Tue May 26, 2020 5:33 pm
HEDGEFUNDIE wrote:
Tue May 26, 2020 2:11 pm
If you were given the choice between a $200k job that’s all based salary, and a $400k job that is half base half stock, are you saying you would take the former?
Well that's not really a fair comparison though, is it? Obviously in that false dichotomy the 400k half and half job has all the upside and the same exact floor given both bases are 200k.

A better hypothetical might be 400k base salary vs. 400k half base, half stock. In that scenario you would have to decide between the upside or downside of the stock units versus the safety of the guaranteed base. What I am really getting at is the comparison between traditional employment compensation and tech compensation.

I understand if all of silicon valley functions similarly, there really is no actual choice for those in the industry but it is interesting to think about from an outsider's perspective nonetheless.
No one is offering the second choice; plenty of institutions are offering the first choice. For the same skill set, that is.
Exactly. When you get to $400k total comp, no one is offering that entirely in base salary, for any role in any industry.

EDIT: Except President of the United States. That is literally the only example I can think of. Every other job will include some variable component at that level of compensation.

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Re: 1:1 salary and stock jobs?

Post by allones » Tue May 26, 2020 7:37 pm

Senior Analyst at a SF based tech company here. The mid-point for my role is 135k salary with 50% of that value granted in RSUs at hire that vest twice a year over four years. We get an annual refresh based on performance that adds to that account balance and extends the vesting clock.

After one year at a company that's doing alright, my RSUs are about 75% of my salary. At vest they are taxed as regular income. I sell on vest for diversification purposes :happy

simas
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Re: 1:1 salary and stock jobs?

Post by simas » Tue May 26, 2020 8:05 pm

calvin+hobbes wrote:
Tue May 26, 2020 5:33 pm
HEDGEFUNDIE wrote:
Tue May 26, 2020 2:11 pm
If you were given the choice between a $200k job that’s all based salary, and a $400k job that is half base half stock, are you saying you would take the former?
Well that's not really a fair comparison though, is it? Obviously in that false dichotomy the 400k half and half job has all the upside and the same exact floor given both bases are 200k.

A better hypothetical might be 400k base salary vs. 400k half base, half stock. In that scenario you would have to decide between the upside or downside of the stock units versus the safety of the guaranteed base. What I am really getting at is the comparison between traditional employment compensation and tech compensation.

I understand if all of silicon valley functions similarly, there really is no actual choice for those in the industry but it is interesting to think about from an outsider's perspective nonetheless.
in the bolded part - only a fantasy world. it does not exist as a choice
there are reasons why equity comp is in place
- it offers employer/management team ability to recognize best performance (vs paying everyone the same base)
- it offers incentives aligned with owners (in theory)
- it offers retention benefits (you as employee suppose to know and feel the hurt of walking away through losing any unvested RSUs/options)
- it offers you as employee ability to control at least some of the timing of the tax events

cash comp offers none of the above, no retention benefits , no ability to comp best performance, no owner aligned incentives, no tax treatment & timing control, etc. that is why the hypothetical choice you presented earlier is as real as unicorns carrying little talking ponies..

HawkeyePierce
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Re: 1:1 salary and stock jobs?

Post by HawkeyePierce » Tue May 26, 2020 9:43 pm

To be fair, Netflix pays engineers >$400k in base salary with next to no stock-based compensation.

However, they are the only Valley firm I know of with a comp structure like that, they are highly competitive and turnover is sky-high.

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Re: 1:1 salary and stock jobs?

Post by calvin+hobbes » Tue May 26, 2020 9:50 pm

simas wrote:
Tue May 26, 2020 8:05 pm
in the bolded part - only a fantasy world. it does not exist as a choice
there are reasons why equity comp is in place
- it offers employer/management team ability to recognize best performance (vs paying everyone the same base)
- it offers incentives aligned with owners (in theory)
- it offers retention benefits (you as employee suppose to know and feel the hurt of walking away through losing any unvested RSUs/options)
- it offers you as employee ability to control at least some of the timing of the tax events

cash comp offers none of the above, no retention benefits , no ability to comp best performance, no owner aligned incentives, no tax treatment & timing control, etc. that is why the hypothetical choice you presented earlier is as real as unicorns carrying little talking ponies..
Absolutely understand that it's not a real choice, just like "200k base vs. 400k half base half stock" isn't a real choice either. Just an interesting thought exercise into this type of comp plan and how it compares to traditional employment. I appreciate the reasons you listed which provided some good insight. Thanks!

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Re: 1:1 salary and stock jobs?

Post by drk » Tue May 26, 2020 10:14 pm

calvin+hobbes wrote:
Tue May 26, 2020 9:50 pm
just like "200k base vs. 400k half base half stock" isn't a real choice either
Wait, this is definitely a real choice. If I left big-time tech for a regular Megacorp or even just normal tech, I would be looking at a very similar comparison.

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Re: 1:1 salary and stock jobs?

Post by HEDGEFUNDIE » Tue May 26, 2020 10:16 pm

drk wrote:
Tue May 26, 2020 10:14 pm
calvin+hobbes wrote:
Tue May 26, 2020 9:50 pm
just like "200k base vs. 400k half base half stock" isn't a real choice either
Wait, this is definitely a real choice. If I left big-time tech for a regular Megacorp or even just normal tech, I would be looking at a very similar comparison.
Exactly. When I got out of business school this was pretty much the choice I faced between consulting firms and regular F500 roles on the one hand, and tech roles on the other.

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Re: 1:1 salary and stock jobs?

Post by drk » Tue May 26, 2020 10:17 pm

HEDGEFUNDIE wrote:
Tue May 26, 2020 7:30 pm
Exactly. When you get to $400k total comp, no one is offering that entirely in base salary, for any role in any industry.
Netflix is the exception that proves the rule here.

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Re: 1:1 salary and stock jobs?

Post by calvin+hobbes » Tue May 26, 2020 10:37 pm

drk wrote:
Tue May 26, 2020 10:14 pm
calvin+hobbes wrote:
Tue May 26, 2020 9:50 pm
just like "200k base vs. 400k half base half stock" isn't a real choice either
Wait, this is definitely a real choice. If I left big-time tech for a regular Megacorp or even just normal tech, I would be looking at a very similar comparison.
I understand what you’re saying but what I mean is it’s not a “real choice” as in, one is clearly leaps and bounds ahead of the other so all things being equal, asking which one I would take is essentially a rhetorical question.

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Re: 1:1 salary and stock jobs?

Post by HawkeyePierce » Tue May 26, 2020 10:52 pm

drk wrote:
Tue May 26, 2020 10:17 pm
HEDGEFUNDIE wrote:
Tue May 26, 2020 7:30 pm
Exactly. When you get to $400k total comp, no one is offering that entirely in base salary, for any role in any industry.
Netflix is the exception that proves the rule here.
Sort of. They're small (~1000 engineers) and only hire engineers who would be staff engineers or higher at peer companies.

Literally nobody else in the Valley runs their engineering org like Netflix.

Given that tech stocks have generally been pretty hot, an engineer with competing offers from Netflix and Google/Facebook probably would've made *more* money declining the Netflix offer.

Four years ago, if you had an offer for $400k cash salary at Netflix and $200k/$200k cash/RSUs at Google, you would've made *far* more money at Google.

Over four years, your total comp at Netflix would be $1.6 million. At Google, $2.04 million assuming you'd sold shares when they vested. $2.4 million if you'd held onto the shares and sold them all now.
Last edited by HawkeyePierce on Tue May 26, 2020 11:08 pm, edited 1 time in total.

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