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Comment by ori_b | Hacker News Reader

> Do employees at facebook really feel the heat?

Two words: Stock price. A big part of compensation is in stock.

This is the really bad part about equity compensation in a publicly traded company. When that stock starts devaluing rapidly it runs past even your "worst" jaded future predictions, and then it is depressing.

Back in 1998 when a company I helped start was acquired by a publicly traded company, and by 1999 the stock price was over $100 and everyone was feeling "super good" about the future. The internal dialog goes something like this, "This may be an anomaly but damn! even if the stock drops to 50% of its value I'm still doing great!."

In my case the stock dropped in value to below a dollar a a share, 99%+ drop. That feels really really horrible, especially if the future doesn't have anything in it that would rescue or recover the value. Even though there was nothing that I personally could have done (legally) to change the outcome, as an engineer and a person who solves hard problems, it made me feel like a total failure. Like I had let down my family, my friends at work, and people who I knew who had bought stock in the company as a sign of confidence in me.

It is really hard to understand that kind of feeling until you've been through it I think.

Why would you hang on to your own company’s stock if it is publicly traded? That seems like “Enron-ianly” bad financial planning. You are already super-exposed to the company’s health by virtue of being employed there. Why add additional exposure by owning/keeping its stock too?!?

I don't know about Chuck here but I've met a number people who had stock stuck in the lockup period when the bust happened.

It needs to vest before you can sell it.

This is often what people think, but almost everyone I know at IPO'd places are at least partially vested. They want that sweet upside and for a while it works and everyone is getting rich together.

I had to work long and hard to convince a friend of mine to diversify at least half of his investments away from Shopify which was his only asset.

That doesn't conflict with the real fact that most employees have most of their equity tied up as deferred compensation that they cannot sell until it vests.

sell it short now, cover with the vested shares :)

Most companies contractually restrict employees from shorting their own stock.

I can't speak for everyone of course, but for the companies that I have worked for, where I held equity, and the company was publicly traded, there were some strict controls over when and how employees could buy or sell shares, and three of them forbade any sort of option trading on the company stock. When being acquired there were even more restrictions on the stock that I received in exchange for my 'founders stock' in the original company.

Or did you have a specific scenario in mind?

Stock compensation at a lot of companies (definitely at Facebook) is in the form of RSUs, which are shares of stock that vest over time. So employees vesting X number of shares over 4 years are watching those shares go up and down in the public markets without actually having the ability to sell them.

That's not an accident: the reason stock compensation is given is to further align employee interests with the long term performance of the company.

Sorry, yea I was talking only about vested stock. Obviously you can’t sell something you don’t own yet.

Isn't there a secondary market for the RSUs?

The point is that they are not vested. You don't own them until the time restriction expires and you're still employed.

Nope

If they’ve been there for longer than a year and a half I doubt most are sweating. They’re still very much up since grant price, plus they get yearly bonuses and refreshers.

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