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Comment by modeless | Hacker News Reader

If you have RSUs worth 200k per year, standard practice is that you get one grant of 800k at the start of employment, vesting over four years. If you got 200k cash instead, you couldn't buy 800k stock in the first year. That's an extra 600k of upside exposure.

If that 600k of extra stock appreciates a lot in the first few years, you are far better off with the RSU grant. If it doesn't, you can quit before it vests and try again at a different company, you're not locked in.

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> That's an extra 600k of upside exposure.

It's also an extra 600k of downside exposure.

No, the downside exposure is limited because you can quit your job. You don't have to actually eat a stock drop loss by working for 4 years and vesting a loser, you can change to another job and reset your basis.

True, but there's an opportunity cost to having worked at Company X on the assumption that your RSUs would appreciate in value, when in fact they decreased and you could have worked at Company Y instead.

Anecdotally, I've never had RSUs depreciate to a point at which I metaphorically lose money for my efforts. This might happen at startups more often and megacorps less often.

Then this past year you've gotten lucky.

We were in an unprecedented bull run for tech stocks for a decade plus. No guarantee that continues. Markets are anti-inductive and past performance is no guarantee of future results.

This has been the case for a while, but also people who started at FB two years ago did very badly.

Again, usually it works out.

You were being paid less because you received those RSUs. The downside is set at the difference between what you got paid and what you would have been paid had there not been RSUs in the equation.

I think the reality is though that is is extremely difficult to find a job that would pay a comparable total comp in all cash. You choice isn't 200k cash, 200k rsu vs 400k cash since the 400k cash offer doesn't really exist. What is more, at least in Europe and Australia and ignoring tiny seed stage startups, the places that give out substantial equity actually pay MORE in cash than more traditional, regional companies.

RSUs have a $0 cost basis - these aren't options we're talking about. Yes it's technically a $600K downside risk but if you recognize anywhere close to that your company went bankrupt and that won't factor into the conversation since you won't have a job anymore.

This kind of up-front grant is a wonderful asymmetric bet. You get $600K skin in the game on day 1. If the stock goes up 20% you get a 20% gain on the whole amount before you even own it. If it goes down materially, you're welcome to quit - but more often what happens is actually the company issues a refresh grant to make up for it - since they don't want you to quit. If it goes back up you now have a ton more stock on the way back up.

You get to earn appreciation on the whole amount before you earn it so up to 4 years early. You have nothing of your own at risk except your time. Things go well, you can do amazingly well. If things go bad, you lost a year or two and you can wander down the street for another lotto ticket.

That is highly dependent on if the stock appreciates.

I remember getting a stock grant at IBM in 2011.

Let alone, OP's example is you get all cash equivalent of the full stock grant... not vesting part.

You made a bad bet. Many engineers optimize for high growth 4-year grants above all else.

Considering that at that point I was with IBM for 5 years before the grant, that wasn't a bet at all

Don’t confuse brains with a bull market…

I don't know a single tech stock that has (significantly) appreciated over the last 12 months. I know a ton that depreciated by 2/3rds.

Which leaves the employee with less upside going forward, at which point they can switch companies and "start over" with an RSU grant that is at par. In this regard the initial grant has a bit of flavor of an option. You have the option to stay on the vesting schedule or change companies and start a new vesting schedule, but any losses on unvested amounts don't hit you if you switch.

incentivizing productive employees (the ones with the most alternatives) to quit if the stock price (or the stock market generally) goes down is a hell of a side-effect when you put it like that.

I guess that's the monkey-paw side of "incentivizing the employees to make the company perform by giving them a stake in the upside"...

That’s why a lot of companies will issue special grants to their highest performing/most critical employees if the shares drop a lot. That makes for a good “double dipping” if the shares recover.

Real Networks did that for us, after the dot-com crash. The stock promptly dropped some more, and never recovered. I've been deeply skeptical of stock-based compensation ever since...

While I would avoid trying to time the market, anyone starting now has a much lower "cost basis" (they're not spending money, it's not a cost) and better chance at their RSUs appreciating while they vest. Using the last 12 months as a guide for the next 4 years isn't a reasonable way to analyze this.

> they're not spending money, it's not a cost

I'm not sure I follow that. If you're getting those shares instead of a higher salary, there's no effective difference between that and a cost you paid out of pocket (except for certain tax implications).

Shopify's plan is an oddity in the industry, normally one doesn't directly trade RSUs and base comp. Netflix has allowed for this (probably still does, but I haven't negotiated against a Netflix offer recently), but I don't know of any other significant examples.

That said, legally, even in the specific case of the Shopify plan, you aren't taking cash and spending it on Shopify stock. If you were, your tax situation would be more complicated.

Netflix lets you take a fraction of your pay in long term options, not RSUs

> normally one doesn't directly trade RSUs and base comp

You do, it just isn't spelled out. If you're getting comp in one way (RSUs), then you're not getting it in other ways (salary). The same is true of other benefits, like free food, 401k contributions, etc. It generally isn't a 1-to-1 thing, but it _is_ a tradeoff.

I look forward to your perspective when the IRS starts arguing your free food and other benefits should be taxed like regular income.

You get 4 years of exposure. You can’t pre-allocate 4 years of salary. That is the difference.

> If you have RSUs worth 200k per year

I am clearly working at the wrong company.

Clearly.

Depends on your level and your geographical location but a staff engineer could vest anywhere from 300K-800K per year depending - more if you see some meaningful stock appreciation over time. Staff engineers are like top ~10% of a company's engineers. That number can go up significantly if you're a principal engineer.

200K seems pretty average for a senior engineer role (i.e. a 'terminal' role, not an up-or-out junior role) in the Bay Area on top of a 150-200K base.

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