Comment by cpprototypes | Hacker News Reader

Comment by cpprototypes | Hacker News Reader

It's unfortunate that this practice of giving almost the entire base salary amount as additional stock (RSU) has not spread outside the bay area. In other regions (such as LA, NY, Seattle, etc.) engineers only get base salary and sometimes a very small bonus. These base salaries are often competitive with the bay area, but the lack of the enormous RSU makes the total comp often 2x or more worse.

EDIT:

After writing this, I was curious how the BLS calculates wages. Here is the answer from their FAQ: http://www.bls.gov/oes/oes_ques.htm#overview

  The following are excluded from the collection of OES wage data:
    Attendance bonuses
    Back pay
    Clothing allowances
    Discount
    Draw
    Holiday bonus
    Holiday premium pay
    Jury duty pay
    Meal and lodging payments
    Merchandise discounts
    Non-production bonuses
    On-call pay
    Overtime pay
    Perquisites
    Profit-sharing payments
    Relocation allowances
    Severance pay
    Shift differentials
    Stock bonuses
    Tool/equipment allowances
    Tuition repayment
    Uniform allowance
    Weekend premium pay
    Year-end bonuses

This means that BLS data is basically garbage for software engineers. And it's somewhat harmful, because companies probably use this trusted government data to check market rates. Even if a company has good intentions and wants to pay market rate, if they use this data they won't realize just how little that is compared to the true market rate.

It's strategic because they know that most candidates barely know what an RSU is and salary is the main factor they will take into consideration. So companies can get by with paying the workers half what they'd make at Google and still make it seem competitive because the salary may be the same.

I think another factor is the salary sites such as salary.com, payscale, glassdoor, etc. These sites often don't include RSU in comparisons among companies. If it was included, many could see just how underpaid they are and there would be more pressure on companies.

My guess would be at the vast majority of tech companies that are not called Google or Facebook, RSU compensation is a tiny add-on to your base comp and wouldn't move the needle much.

And another bad thing is that I don't really find RSUs for most startups that attractive. I'd rather have RSUs from some public company like Amazon or Google than some non-public startup. At least I can easily sell Amazon stock.

Nitpick: Non-public companies don't give RSUs. They either give stock options or "restricted stock", which is actually a completely different thing from RSUs. Either way, the basic intent is to ensure that, for tax purposes, the grant has zero value, because if they gave you a non-zero-valued grant then you'd have to pay taxes on it and if you can't sell the stock to cover taxes that is going to suck. Once public, the company can give RSUs because they are able to actually take tax withholding out of them (by selling a bunch).

I would argue that RSUs are rarely something the employee wants, compared to equivalent cash. At a big public company, you aren't likely to be able to affect the stock price with your personal performance, so it's not an incentive. You also likely can't predict whether the stock is likely to go up or down -- if you can, you're in the wrong job.

I would speculate that the appeal of RSUs to Google is as a hedge -- if Google's stock price goes way down, at least they'll get a break in employee compensation. Otherwise I honestly don't know what the point is. Just give people cash.

Startup equity is a completely different beast. You're getting a grant that is (in theory) worth $0, but you may actually be in a position to predict whether that startup is going to succeed, and even to influence the outcome. Maybe. That said, if the company doesn't tell you what percentage of the company you're getting, then it's a scam and you should treat it as $0.

(I'm a former Google employee and current startup founder.)

Yes, you pointed out the main advantage - it's a bet against the stock price of the company. This lowers the volatility,and it doesn't lower expected earnings too much because if things go up you can just hire more people at lower RSU amounts.

The other advantage is you can incentivize people to stay to at least the RSU cliff, which improves your retention and institutional knowledge.

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