I think you guys should double-check the mechanisms of the stock grants. IIRC the big tech companies’ compensation package includes “stock” which doesn’t actually behave like stock in the obvious intuitive sense; they do some thing where they give you X dollars worth of stock at the market price at vesting time, so it’s basically equivalent to giving you X dollars except the liquidity is funky.
(Low-confidence, I haven’t actually worked at a big tech company but have a lot of friends who have.)
That’s not correct, or at least not how my Google stock grants work. The price is locked in at grant time, not vest time. In practice what that means is that you get x shares every month, which counts as income when multiplied by the current stock price.
And then you can sell them or whatever, including having a policy that automatically sells them as soon as they vest.
Most big tech companies use RSUs, or Restricted Stock Units. These are not options nor dollar equivalents, they are shares. They are denominated in shares, and the grant is for a number of shares, with a vesting schedule of how many shares become yours on what dates (often a 4-year term, with 25% vesting after 1 year of employment, then ~2% per month or 12.5% every 6 months). Additional grants may be made in future years, with a similar or different vesting schedule.
The stock price when granted is mostly irrelevant (it matters to the company, and sometimes to your loan officer if you’re going for a mortgage or something, but it’s not part of your compensation or taxable income when granted). The stock price when VESTING each block is treated as normal compensation on your taxes. This stock price (at vest, not grant) is the capital gains basis if you hold it for awhile then sell it.
Behind the scenes, the companies calculate the grants by a “total comp target”, and figuring out how many shares to grant based on a dollar amount. But by the time it’s actually written down in an offer or made as a grant, it’s just shares. The only difference between a granted-but-unvested RSU and a normal share is that it’s conditional on continued employment, and there are no voting rights. Once vested, it’s literally a normal share.
This is at least not true for Google, as far as I can tell. Also seems kind of weird since I feel like the primary purpose of stock compensation is to create incentive alignment between employee and company.
It’s always tricky to impute “primary purpose”, but from what I saw, the incentive effect was mentioned often, but nobody really believed it. There’s just no way that any individual to tell if they had impact on that dimension. I’d say the finance and reporting aspects (it’s not part of your salary, and is separate in many corporate reports) are probably more important in keeping it universal.
I think you guys should double-check the mechanisms of the stock grants. IIRC the big tech companies’ compensation package includes “stock” which doesn’t actually behave like stock in the obvious intuitive sense; they do some thing where they give you X dollars worth of stock at the market price at vesting time, so it’s basically equivalent to giving you X dollars except the liquidity is funky.
(Low-confidence, I haven’t actually worked at a big tech company but have a lot of friends who have.)
That’s not correct, or at least not how my Google stock grants work. The price is locked in at grant time, not vest time. In practice what that means is that you get x shares every month, which counts as income when multiplied by the current stock price.
And then you can sell them or whatever, including having a policy that automatically sells them as soon as they vest.
Most big tech companies use RSUs, or Restricted Stock Units. These are not options nor dollar equivalents, they are shares. They are denominated in shares, and the grant is for a number of shares, with a vesting schedule of how many shares become yours on what dates (often a 4-year term, with 25% vesting after 1 year of employment, then ~2% per month or 12.5% every 6 months). Additional grants may be made in future years, with a similar or different vesting schedule.
The stock price when granted is mostly irrelevant (it matters to the company, and sometimes to your loan officer if you’re going for a mortgage or something, but it’s not part of your compensation or taxable income when granted). The stock price when VESTING each block is treated as normal compensation on your taxes. This stock price (at vest, not grant) is the capital gains basis if you hold it for awhile then sell it.
Behind the scenes, the companies calculate the grants by a “total comp target”, and figuring out how many shares to grant based on a dollar amount. But by the time it’s actually written down in an offer or made as a grant, it’s just shares. The only difference between a granted-but-unvested RSU and a normal share is that it’s conditional on continued employment, and there are no voting rights. Once vested, it’s literally a normal share.
Ah, I was probably thinking of the RSU/option distinction and misremembered. Thanks!
This is at least not true for Google, as far as I can tell. Also seems kind of weird since I feel like the primary purpose of stock compensation is to create incentive alignment between employee and company.
It’s always tricky to impute “primary purpose”, but from what I saw, the incentive effect was mentioned often, but nobody really believed it. There’s just no way that any individual to tell if they had impact on that dimension. I’d say the finance and reporting aspects (it’s not part of your salary, and is separate in many corporate reports) are probably more important in keeping it universal.