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Comment by MiroF | Hacker News Reader

> anything to pay people in stock, since it just siphons off value from all existing stock

wait what?

Creating new shares dilutes the existing share value. Paying employees in shares means you're diluting the stock value every time.

Of course, for most publicly traded companies there are so many outstanding shares that this is negligible.

I thought most executive compensation was paid out of pre-allocated shares.

Most employees are not executives.

If you scroll up, the question was "Aren't executives mostly paid in stock and bonus?"

Let’s say I have 1000 outstanding shares all worth $10. I need to pay someone a $5000 bonus. I’ll just issue 500 shares of stock to them instead because, well, that’s about $5000.

Hypothetically the per share price goes down by 1/3 here and is now worth $6.67 (but the company’s still worth $10,000 total it’s just 1500 * $6.67 instead of $1000 * $10).

Generally though bonuses like this come out of a pool that’s already been allocated years ago and there’s no change to stock price

Even if the pool is allocated years ago, it's still effectively dilution (as before shareholders effectively owned a fraction of the unallocated sharepool).

It doesn't cost cash, I think they meant.

Yeah, sorry it was unclear but I was more confused by the "siphoning" value part.

"Dilutes" stock value (per share) would possibly be more accurate? Keep throwing shares at execs; if the company is successfully, it's a dilution. If it fails, then at least they didn't waste real money.

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