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Comment by sangnoir | Hacker News Reader

> Yeah, if you don't intend on selling then you should say so and not offer equity so the employees can make a better decision

What's wrong with offering equity and staying private? I don't see any deception there - say if Valve gave equity to it's employees, that'd be perfectly fine.

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It would be perfectly fine, but if you join a company A because they offered equity instead of company B which offered more money BECAUSE you wanted the equity to materialize, but the founders never intended to sell, then you are taking objectively worse offer because you were under the impression equity meant something.

Of course any company can give out equity to their employees, but if it never turns into money then who cares?

Equity is always worth _something_ if the company doesn't fail. At some point investors want to make some money back, whether that's through a sale of some sort or just through dividends.

I do agree those are quite different beasts and you want to have an idea of the relative likelihoods if you're making a decision based on them.

> [...] or just through dividends.

What if the company never pays dividends?

Like Google?

Or any company that prefers buybacks over dividends.

Economically, they are the same. But they are taxed differently in many jurisdictions.

(Though in the case of buybacks, the shares you got as an employee are worth something, if the buyback is done as something like an auction.)

Equity in some companies means actual voting power, especially when one party doesn’t retain 50%+ control.

Minority equity in a company means nothing.

Let's vote on the $20mil bonus to the CEO or distribute it amongst the owners of the company. Oh, the CEO (and majority owner) gets it all.

Dividends are taxed at a lower rate than salary and other forms of ordinary income. If a company has surplus money, it should eventually be remitted to the equity holders as dividends. I guess it doesn't need to be, though.

Unless the CEO literally owns >50% I don’t see how it means ‘nothing’. Voting blocs come and go I imagine, that’s definitely something.

Almost all equity given to employees is a totally different class of shares than held by the founders.

Employee options pools tend to be maintained at 10-15% of the company. Unless you are a cofounder, very-early employee, or recruited-big-exec in a growth phase, your equity, AND importantly, ALL the equity from your employee peers sums to less than whatever the VCs+Founders want. Ideally your interests are aligned, and any gain they get your share-in (albeit in a much smaller amount). But things like preferred shares getting liquidation preferences screw with this calculous, as to differing investment horizons.

When any of the above mentioned have disagreements, won’t they try to recruit support from the remaining shareholders?

What company gives out >50% of their company to their employees?

Because the founders likely won't issue any dividend distributions, they'll just likely borrow against their holdings for decades or even until the end of their lives.

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