[HN Gopher] Golden Handcuffs
___________________________________________________________________
Golden Handcuffs
Author : bitsweet
Score : 72 points
Date : 2021-05-13 16:17 UTC (6 hours ago)
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| throwaway-44373 wrote:
| What it seems to me this is saying is the following: - before
| we'd give you X options (say, 40,000) vesting over 4 years - now
| you get 1/4 of that, 10,000 vesting annually
|
| The strike price of both grants is the same (say, $1/option)
|
| Now the question is, what happens year 2?
|
| If the company is a lot more valuable, two things will change: -
| strike price will be higher (say, $3/option) which makes the
| options slightly less attractive. But that's not the big deal - #
| of options will go down, because the more companies grow the more
| options are valuable and the less they give out to employees. So
| year 2 options will be 5K.
|
| If this continues, over 4 years the end the employee will have
| something like 10K + 5K + 3K + 2K = 20K options vs 40K. Not only
| that, but the 20K options will have a much higher blended rate.
|
| On the positive side, there will be no reason for the employee to
| stay if they don't want the new grant. But the reason they don't
| have to stay is that they were not comp'ed as much in the
| beginning.
|
| So me reading between the lines, this will mean a lot less
| compensation for early employees of successful startups vs the
| traditional model.
|
| There is a reason why the handcuffs are called golden. At the end
| of the day employees decide to stay because it's worth it for
| them.
| drenvuk wrote:
| >There is a reason why the handcuffs are called golden. At the
| end of the day employees decide to stay because it's worth it
| for them.
|
| Precisely this. Coinbase has made it and now they want to keep
| employees from resting and vesting. Stripe did this too.
| they're just being cheap.
| trompetenaccoun wrote:
| Coinbase is an interesting company. They're grossly underrated
| and laughed off as an online casino, but they invest all that
| money they make very wisely and strategically to grow the
| business.
|
| I find another paragraph from that press release interesting:
|
| > _Traditionally people expect they need to negotiate for the
| best package after being hired in a new job. Those that do this
| well tend to be rewarded, and those that don't lose out. These
| negotiations can disproportionately leave women and
| underrepresented minorities behind, and a disparity created early
| in someone's career can follow them for decades. We want to do
| everything we can to ensure that's not the experience at
| Coinbase. All employees in the same position, in the same
| location, receive the same salary and equity offer. No
| exceptions._
|
| If this was mandated to be standard practice, instead of the
| insane approach some countries take with minority quotas and
| such, we'd be a lot further in terms of equality in the work
| place. Also salary negotiation favors aggressive and outgoing
| types, while there might be qualified candidates who get left
| behind just because of their personality.
| PLenz wrote:
| This is just reinventing unions but without the employee's
| ability to input via collective bargaining.
| akarma wrote:
| If you're ambitious, this doesn't hurt your ability to join
| Coinbase and grow quickly, which is an important factor in
| the tech industry and its appeal of opportunity. A union
| would.
|
| This offers a more level playing field for employees to begin
| their time at the company without stringent rules around who
| can get promoted and when and other red tape. Seems like a
| great decision.
| joshuamorton wrote:
| > A union would.
|
| This claim is disputed by, like, many unions. Tenure based
| promotions/compensation is one, but certainly not the only
| approach that unions use.
| akarma wrote:
| Nearly every major union I've seen supports seniority-
| based promotions.
|
| I imagine that this is not popular with many employees,
| and so it cannot be a part of their initial pitch -- as
| you said, not the only approach unions use.
|
| If established unions support seniority-based promotions
| but nascent ones don't publicly support them, it would
| follow that they must develop into supporting seniority-
| based promotions. This is possibly one of those issues
| where a union gets power and then takes overarching,
| unpopular measures that rid the company of anyone who
| wants to work harder and be promoted faster.
|
| If you have evidence that unions don't support seniority-
| based promotions, I would love to see it! I haven't had a
| chance to gather data, so I'm only speaking anecdotally.
| joshuamorton wrote:
| > Nearly every major union I've seen supports seniority-
| based promotions.
|
| There are a number of well known counterexamples, sports
| and acting unions/guilds for example.
|
| > If you have evidence that unions don't support
| seniority-based promotions
|
| I've yet to see any tech union advocate for this
| position, and they generally advocate against it. Tech
| Workers Coalition and the Alphabet Workers Union are the
| two I know of in this case.
|
| > If established unions support seniority-based
| promotions but nascent ones don't publicly support them
|
| This isn't really correct. Unions in certain fields
| support seniority based promotions. But on the other
| hand, certain professional fields support seniority based
| promotions without unions. Like medical and legal fields
| have non-union professional associations that afaik don't
| advocate for any sort of tenure based compensation.
| Despite that the most sought-after biglaw companies use a
| mostly-tenure based compensation process. The medical
| field uses an unholy combination of merit (exams and
| matching) and tenure (residency).
|
| > This is possibly one of those issues where a union gets
| power and then takes overarching, unpopular measures
|
| It's unclear how this could happen. Unions are
| democratic. The members vote on things. They generally
| cannot take unpopular measures[*]. It may be that there
| is a majority in some industries that prefer tenure based
| seniority.
|
| [*]: Ok the exception here is if in a "Right-to-Work"
| state people refuse to join the union, but it still has a
| majority membership and is therefore NLRB recognized, so
| you have say, 51% employees in the union, and those 51%
| have a directional bias. For example, everyone who
| supports tenure based compensation is a union member, and
| they make up 26% of the company, and 52% or so of the
| union. Then they vote and win and the union contract
| includes this clause. The fix here, of course, is for
| other people who don't support this to join the union.
| But then they don't want to because of the idea that
| unions are bad and support unpopular policies.
| akarma wrote:
| I'm certainly not an expert on unions, so thank you for
| the detailed reply!
|
| > There are a number of well known counterexamples,
| sports and acting unions/guilds for example.
|
| I can't imagine how promotions would apply to areas like
| sports and acting the same as it applies to typical
| careers that have ladders, so I wouldn't cite it as a
| well-known counter-example.
|
| > I've yet to see any tech union advocate for this
| position, and they generally advocate against it. Tech
| Workers Coalition and the Alphabet Workers Union are the
| two I know of in this case.
|
| With regards to the Tech Workers Coalition, they want
| "explicit criteria to achieve (promotions)" [1] which
| would necessarily involve more red tape and likely a
| seniority-basis, as not every employee can be promoted.
|
| > Despite that the most sought-after biglaw companies use
| a mostly-tenure based compensation process.
|
| This is a reason why I elected not to go to law school,
| and a contributing factor for several people I know who
| moved from law to tech. The lack of this is what makes
| tech unique and adopting the homogeny of another un-
| meritocratic industry should certainly be avoided.
|
| [1] https://techworkerscoalition.org/bill-of-rights/
| munificent wrote:
| This reads to me like when you talk to a used car salesman and
| the first thing he says is, "We don't negotiate on price."
|
| When someone you have a semi-adversarial relationship with
| removes your ability to negotiate, they aren't doing so in your
| favor.
| throwaway3699 wrote:
| All this is telling me (someone who cares about negotiation) to
| avoid Coinbase.
| fshbbdssbbgdd wrote:
| I've been told before by recruiters that they don't negotiate
| and that policy suddenly disappeared the moment I said "no, my
| other offers are higher."
| Rapzid wrote:
| The "no negotiation" policy ran off with the "COL adjustment"
| policy :D
| the_jeremy wrote:
| This seems like it will just result in those who can be
| underpaid being hired at lower levels. If a hiring manager
| really wants someone and they can't pay them more, they can
| hire them at a higher level.
|
| If decisions are made by the higher-leveled ICs, then it seems
| like even more decisions will be made by white men under this
| culture.
| akarma wrote:
| > If a hiring manager really wants someone and they can't pay
| them more, they can hire them at a higher level.
|
| Yes, this is how it should work! Their role will then involve
| a higher level of responsibility and expected output that
| they better be prepared for, and they'll be compensated more
| for that.
|
| It makes much more sense than people getting higher/lower
| compensation for the same level of responsibility and
| expected output based on their competing offers at the time
| of signing, doesn't it?
| trompetenaccoun wrote:
| Exactly. I find it incredible that there are so many
| comments defending shady behind-closed-doors negotiations.
| Maybe a lot of the HN demographic are the type of people
| who benefit from this but for everyone getting a sweet deal
| there's someone else getting paid less. This is a step in
| the right direction, if you're actually worth so much more
| you can prove it and work your way up. No one should get a
| high salary off the bat just because they were able to
| impress the bro from HR during the interview. Companies
| should be competing for talent on an open market. They
| don't tell you salaries upfront because they want to pay
| you as little as they can get away with.
|
| At all jobs I worked in my life I got paid more than most
| coworkers who were often even more dedicated to their jobs
| than me. At one company, the less I cared about being
| productive and the more I complained, the more leeway and
| compensation they gave me. It was like in Office Space.
|
| Not that I refuse free money when they hand it to me, but
| that's obviously an unfair system. It's not a smart policy
| from the shareholder's perspective either, this is simply
| bad management and leads to lots of employees feeling
| treated unfairly.
| ghaff wrote:
| >more dedicated to their jobs than me
|
| Is that actually a relevant metric? Were they also more
| effective at their jobs than you?
|
| I'm often not sure what productivity means in this
| context. If you can produce better results in 4 hours a
| day, go for it.
| namelessoracle wrote:
| Aggressive negotiating types will fight for position rather
| than salary at that point. I wonder how flat Coinbases
| structure is.
|
| I feel like if you had a skill they REALLY wanted, they would
| create a new position for you to get around this rule.
| gtaylor wrote:
| The companies that I've been a part of that employed this non-
| negotiation strategy ended up only shifting the negotiations
| from compensation to title. The same negotiators still come out
| on top, since they'll request higher titles in order to meet
| their comp expectations (since they can't negotiate for comp
| directly). As a result, the eng org can end up topheavy in
| leveling.
|
| This is a tough problem, but these non-negotiation policies
| aren't the solution. They make the inequity even worse since it
| becomes harder to negotiate (for title) than for incremental
| comp increases.
| sokoloff wrote:
| I don't think these make it worse overall. It definitely
| makes it works for some but better for many.
|
| I suspect this policy and the 1-year grants makes it quite a
| bit harder for Coinbase to poach employees from FAANGs.
| jandrewrogers wrote:
| In my experience, when salary is narrowly banded such that
| there is little negotiation within the band for a position,
| people negotiate position as a proxy for salary. It produces
| the same net result in a more convoluted and opaque way. I've
| seen this pattern in several places. You see patterns in
| companies where new hires are consistently more senior than
| existing employees, largely because compensation has not kept
| up with the market rate.
|
| This creates some perverse incentives. I've worked at large
| companies where when compensation didn't fit an existing
| standardized value, they would literally create a "new position
| type" in the HR system for that hire that not coincidentally
| matched that hire's salary requirement. This caused a weird
| proliferation of titles that had little semantic relationship
| to the overall organization. At one company, they had 1,000
| roles in the HR system for this reason, that at any sensible
| company could have been reduced to fewer than 100.
| lostdog wrote:
| Both this VC's post and coinbase's post ignore the 90-day
| exercise window on stock options, so they're getting rid of the
| "golden" but keeping the "handcuffs."
| dalyons wrote:
| Well coinbase is RSUs now(and for quite awhile), so exercise
| window doesn't apply
| kritiko wrote:
| This reminds me of restaurants adopting (and then mostly
| abandoning) no tipping policies. You're trying to change an
| entire culture, good luck!
|
| "Letting that market operate efficiently and not trying to game
| it makes a lot of sense to me."
|
| This is not obvious to me. In many ways, the job market is not
| like other markets. Onboarding employees is a money-losing
| proposition. Turnover is disruptive. Recruiters cost money.
| Benefits operate on a calendar-year basis or have waiting
| periods.... I could go on, but there are all sorts of reasons for
| companies to pursue retention over an "efficient market."
| gkoberger wrote:
| This sounds employee-friendly, but it's total BS.
|
| You'll just be getting less equity at a higher strike price every
| year, so it's just a sneaky way for these companies to give
| employees less. They can still say "we're giving you $100k in
| stock this year", but it's a lot less stock since you're not
| locked into a strike price.
|
| If you want to leave after 1 year (post-cliff), you can leave
| under either scheme and get 1 year's worth of equity. This
| doesn't solve any "golden handcuff" problems, it just hurts
| employees.
| smilekzs wrote:
| > the idea that an employee can't leave because they would be
| giving up too much money if they do.
|
| This is part of the reason a cash-biased compensation package at
| a startup can be attractive. Effectively it places less coupling
| between your career path and financial success, which IMHO
| reduces unnecessary stress and gives you freedom to make the
| trade-off between these two at the time of _your convenience_,
| rather than some fixed number of months.
| fullshark wrote:
| As a laborer, if I have a choice between a world where golden
| handcuffs exist and world where they don't, I choose the world
| where golden handcuffs exist. Presumably the idea is they will be
| forced to make work better to retain employees instead and it
| will a net win for workers, but there's zero details or
| explanation as to how exactly that will happen.
| anonymousiam wrote:
| There are many different sorts of handcuffs. Mine was a
| lucrative defined benefit retirement plan. My (former) company
| eliminated the plan about 30 years ago, but grandfathered
| everyone who was still in the plan. About two years before I
| was eligible to retire (early), they changed things again and
| made it impossible to continue contributing to the plan. They
| offered a temporarily higher match to 401k contributions as
| compensation. (For the $200k I lost, I got about $20k back.)
| Eliminating further contributions meant I could no longer
| increase my retirement payout. Converting the annuity to lump
| sum (the obvious choice) meant that my lump sum payout would be
| reduced every day that I continued working there. The net
| effect was about a 12% reduction in pay. I took the early
| retirement as soon as allowed, and then took a job elsewhere
| for a 15% raise.
|
| (The reason for the 12% reduction may not be obvious. When
| converting an annuity, they look at actuaries to estimate when
| I will die. The lump sum payout converts the annuity payments
| from the retirement date to the date of my death into one
| payment, distributed over five years. If I work longer, the
| time between my retirement and my death decreases. Thus the
| longer I work without retiring, the lower the payout.)
|
| My golden handcuffs were changed into a golden kick in the
| arse.
| TulliusCicero wrote:
| I don't see how 4-year stock grants that steadily vests are
| golden handcuffs at all, since if you switch to a similar company
| they'll just give you a new stock grant that also steadily vests.
|
| The only part that's like golden handcuffs is the 1-year cliff
| that's standard, but 1 year ain't bad.
| rawtxapp wrote:
| More likely than not, your current stock has appreciated
| significantly (at least at FAANG), so you would be leaving all
| the paper gains on the table. And it's not guaranteed that
| you're getting vesting stock at the next company.
| drewg123 wrote:
| One of the things that I love about working for Netflix is that
| they just pay you every 2 weeks and that's basically it. There
| are no RSUs that are stacking up, no yearly bonus, etc. No smoke
| and mirrors. No internal websites to calculate the value of your
| compensation like at Google.
|
| I remember how much trouble the yearly bonuses caused when I
| worked at Google. In the fall, some people would become much less
| active and turn from top performers into dead wood while they
| hung around, waiting for the yearly bonus payout in Jan.
| rickspencer3 wrote:
| From what I have seen, if you can be well paid, and put a
| significant portion of your salary into index funds, over the
| years, you will generate a modest nest egg, and have choices in
| your late middle age or retirement. This is a different path
| than betting on a startup you joined, and hoping that your
| options end up paying out, but, it is not a bad path.
| oblio wrote:
| Why would they become less active in the fall? Wouldn't it make
| sense for them to be less active after January?
| drewg123 wrote:
| There was a mental perception that if you left just a "few"
| months from the yearly bonus payout, you were leaving money
| on the table. So people would normally leave in the spring
| and summer, but try to stick it out until the bonus if they
| were thinking about leaving in Oct. or later, since it was
| only 3 more months..
| walshemj wrote:
| Its the same in finance
| walshemj wrote:
| The opposite side is two of my ex employers (one from 20 years
| ago) shares are still paying tax fee dividends in my ISA and
| increasing in value.
| nineplay wrote:
| I've talked to two FAANG-level recruiters recently about remote
| openings, which are all the rage now.
|
| One was willing to give a base-salary range but absolutely
| refused to provide any comp information beyond that. Signing
| bonus? Equity? "We are still working out those numbers for remote
| employees, we'll negotiate when we give you an offer"
|
| The other - everyone at the same level at the same location gets
| the same comp and the same equity, here it is.
|
| Guess which one I'm willing to pursue. These days the whole
| process of doing a tech interview is grueling, between the 'leet'
| coding practice, the take-home assignments, the 4-8 separate
| interviews. If they think I'm putting myself through all that
| without some guarantee of a considerable pay raise, they're
| crazy.
|
| I don't think "wait til we get you the offer" is going to work
| much longer for a lot of companies. Not unless they go back to
| the old-fashioned "tell us about yourself" interviews, which
| would be quite a relief but I don't see happening anytime soon.
| 908B64B197 wrote:
| Anything other than the rate at the main campus is not a
| serious offer.
| joshuamorton wrote:
| Why? Say you live in or near Atlanta, the rate paid to (on
| site) employees in Atlanta is less than the rate paid to (on
| site) employees in SF (I think this is true for pretty much
| every FAANG).
|
| Why should a remote employee in Atlanta make more than an
| onsite one?
| kelnos wrote:
| > _Why should a remote employee in Atlanta make more than
| an onsite one?_
|
| Not more, but why shouldn't they be paid the same if
| they're doing the same work?
| 908B64B197 wrote:
| Two reasons to open a satellite office. First is to cut
| costs, second is to grow the business and recruit from an
| untapped talent pool.
|
| I'm not a cost cutting person, so I'm not interested by
| the former. Trying to play games with CoL signals that
| instead of putting money in growing the product, they
| would rather try to squeeze as much as they can.
| sokoloff wrote:
| If there are more people who are equally qualified and
| willing to do the job remotely for less than the on-site
| team in Silicon Valley is, then the market for remote
| people to do the job is more employer-favorable than the
| on-site market.
|
| Why should they pay person X more than needed to get the
| level of talent they want under the conditions they're
| willing to offer?
| not2b wrote:
| Markets don't care about justice. It's all about supply
| and demand. If a company needs people on-site in SF and
| also needs people on-site in Atlanta, it will have to pay
| the former more than the latter. If they don't, they will
| either be paying more (if they give the Atlanta folks
| extra money) than they have to or they won't be able to
| fill the positions (if they don't give the SF folks extra
| money).
| ghaff wrote:
| Well, in the scenario you're responding to, you're
| actually asking why an onsite Atlanta employee should be
| making less than an onsite SF employee (based on the
| statement that remote should get main campus salary).
|
| And the answer is market rates but a lot of people don't
| like that answer.
| adamcstephens wrote:
| If the hiring pool is remote, then the local market rates
| don't matter. Perhaps an open cost of living difference
| could be ok, but there is no market rate justification.
| the_only_law wrote:
| Will I at least make the same insane TC CoL adjusted? Or am
| I more likely to be paid what an average developer in
| Atlanta can take home or just a bit more?
| joshuamorton wrote:
| > Will I at least make the same insane TC CoL adjusted?
|
| There's enough disagreement about what this means that
| its difficult to say. If your goal is to buy a house,
| you'll be making more CoL adjusted. If you're happy to
| rent, its less clear cut but still probably close.
|
| > Or am I more likely to be paid what an average
| developer in Atlanta can take home or just a bit more
|
| More.
| hinkley wrote:
| > we'll work it out when [we] give you an offer
|
| Maybe I'm a cynic, or I've read too many books with a powerful
| cabal that lies while telling the truth.
|
| But one interpretation of these words is that you are going to
| be a test subject in that 'work it out' activity.
| nineplay wrote:
| I wouldn't be surprised after all the hemming and hawing
| about how they don't have remote compensation numbers in
| place. "How much less can we pay people who don't live in SV?
| Let's bring a bunch of chumps in and low-ball them to find
| out."
| hinkley wrote:
| I think we underestimate the amount of self-deception that
| goes on with these deceptions. As evil as some people can
| be, I think more often we are just unwilling passengers on
| someone else's delusion.
|
| Waking up every day thinking that things aren't going to
| work out is hell. At some point you have to do something
| about it, or you can't keep going on. Hope doesn't care if
| it's objective or not, and evolution preserves it if it
| actually works slightly more than never.
| readams wrote:
| The only way to know your value in the market is to get
| multiple offers and then negotiate against them. You'll do much
| worse if you just pursue one option, especially the option
| where they tell you that everyone gets the same (low) pay.
| xyzelement wrote:
| This is an incredibly nearsighted approach for reasons other
| responses partially point out.
|
| First you have confused uncertainty with a bad scenario. For
| all you know the offer from the first company would end up much
| higher than from the second but you won't know.
|
| Second, and this is probably a bigger deal - lack of exact
| range often indicates flexibility in seniority, skillset and
| scope. So in your case, your only good scenario is if you match
| exactly the picture of an employee company 2 has in mind for
| the role/comp. If you are just a little under, you won't make
| the cut. If you are any over, they will underpay you.
|
| Comoany 2 gave themselves more flexibility with hiring and
| paying you. Eg if you aren't quite on the level they thought,
| they could level you down as a say in, which you would
| appreciate. Similarly if you are beyond what they expected they
| may offer you more than you'd think, and more than company 2.
|
| Mainly, you have cut yourself off from valuable information and
| potentially leverageable competing offers because you couldn't
| hang with a bit of uncertainty.
| logicslave wrote:
| I mean you can just go on levels.fyi and see the comp for
| yourself. Recently FB has been giving ~350k for a senior
| developer working remote. Thats great money for someone in the
| mid west. Studying a few months for a job that could set you up
| financially for a long time is a great deal.
| nineplay wrote:
| Call me cynical, but they are supposed to be trying to
| recruit me. I say "That doesn't sound like more than I
| currently make, what about other forms of compensation?" If
| they say "well we're not sure...", I'm going to be pretty
| reluctant to jump in. For all I know they are "re-leveling"
| and those 400k paydays are going away.
| logicslave wrote:
| Yeah but they arent though. 350-400k is actually somewhat
| low for senior. They have been paying this for a long time.
| Its great money remote. I really dont understand the issue
| joshuamorton wrote:
| > Yeah but they arent though. 350-400k is actually
| somewhat low for senior.
|
| I wouldn't say this. It's solidly middle of the road for
| a Google or FB senior, and high/unreachable for an Amazon
| or Microsoft Senior. Its probably(?) on the lower side
| for Netflix.
|
| This is all before stock growth. Someone who has been a
| Senior for 5 years at Google or Facebook will be vesting
| shares that doubled in value, so the take home pay will
| be higher.
| ralph84 wrote:
| Don't piss on my shoes and tell me it's raining. Just say it: As
| an investor you want to keep more of the wealth employees create
| for you.
| codemac wrote:
| Huh? So now handcuffs with no gold?
|
| This is much worse for start up employees - as grants each year
| allow for even more dilution, management hand wringing, and
| changed expectations. Do founders stock get magically taken away
| when they suck at being a CEO? When deadlines are missed?
| Generally they just get moved to the board.
|
| The commitment you receive from your employees is HUGE. They show
| up 40+ hours a week, and bet their entire family and time on your
| company. Stop acting like somehow paying them even 0.1% as well
| as your founder is somehow a "bad marriage".
|
| If they're pulling down the team, fire them. If you're afraid
| they're making too much money and may quit / retire - why are you
| in capitalism at all? Ownership is supposed to provide benefits.
|
| The brazen attitude towards those that actually build your ivory
| tower is incredible.
| choppaface wrote:
| The C-level to IC comp ratio is still way too astronomical. If a
| VC is telling you he feels there's a better way to comp, he has a
| financial interest in ensuring your loss.
|
| Do not support investor-focused comp models like backweighted
| vesting (Amazon) or outright fraud like a start-up giving you a
| stock offer with no percentage or no 409A.
|
| Employees deserve high-quality equity on par with investors. The
| OP's suggestion is a major step back in one of the greediest
| economies in history. Complete non-starter. Don't let this guy
| live in your thoughts rent-free.
| tick_tock_tick wrote:
| > Employees deserve high-quality equity on par with investors
|
| Why? As an employee I'm taking on nearly 0 risk. Maybe if they
| are paying me poorly I can see the argument where I'm
| "investing" more time/work into the company that I am being
| paid for and that difference should be made up with equity but
| otherwise this seems divorced from reality.
| 908B64B197 wrote:
| > Why? As an employee I'm taking on nearly 0 risk.
|
| I'm not sure how you are pricing things. FAANG stock comp is
| guaranteed money; You can sell it as soon as it vest for
| exactly the amount you signed for. Startup equity, not so
| much (there's no guarantee that a liquidity event will ever
| happen for starter).
|
| Unless you are working in a lower tier market where stock
| comp isn't the norm.
| floren wrote:
| The company could not exist without the employees, and for
| most startups it could not exist without the investors. Why
| should one critical component be rewarded not just with
| _more_ of the company, but with _better_ versions of the same
| rewards?
|
| You can argue that employees are fungible, but so is investor
| money, and frankly I'd rather take random money than random
| programmers.
| drenvuk wrote:
| If you're a good employee you're better off working at a
| FAANG. the risk your taking is working for relatively crappy
| pay for the chance at a large pay off at the end when the
| company you believe it finally IPOs. At a FAANG I don't have
| to care, I'm making $300k-$500k or more if I'm actually worth
| anything.
|
| It's an investment by the employee. Coinbase is being cheap
| and it will come back to bite them. Odds are they don't care
| for the lifetime of the company since they're so tied to
| bitcoin's success.
| kemitche wrote:
| Did Amazon return to back-weighted comp? The offer I received
| two years ago had comp that shifted from "cash focused" to RSUs
| over 4 years, and had equivalent cash value over the 4 years.
| Obviously, by year 3/4 when comp was mostly/all RSUs, the stock
| could have gone up or down significantly.
|
| Given that the year 1 cash could be used to buy stock if I
| really wanted, it didn't seem an unreasonable approach to comp
| to me.
| majormajor wrote:
| I saw the same in an offer from them a few years ago, but
| some less experienced acquaintances seemed to be getting
| offers without the cash component in years 1 and 2.
|
| I wonder if it has to do with cases where their "salary
| ceiling" would otherwise make the offer wildly uncompetitive
| for experienced people.
| voidfunc wrote:
| I definitely know some people on the 10/10/40/40 Amazon comp
| plan... also seems to be a common tactic to PIP people just
| before year 3 vests.
|
| Fuck Amazon. I'll never work for them.
| andonisus wrote:
| They comp the difference in vesting schedule (against
| average) with a cash sign on bonus that pays out over the
| first 2 years. Your yearly comp is equal to getting 25% of
| the RSU value per year (plus the actual stock accrues value
| over this time).
| choppaface wrote:
| The Zoox acquisition offers are all back-weighted. There are
| several posts on Blind recently disclosing back-weighted new-
| hire grants. The mean tenure time at AMZ is 2 years and most
| engineers I know do NOT vest 50% at the 2 year mark.
| solidasparagus wrote:
| The mean tenure time is a terrible measure for any company
| that is growing at the rate Amazon does. If you double your
| team every year, the average tenure is going to be really
| low even if not a single person quits.
| hinkley wrote:
| I feel like we should have PSAs on LinkedIn that tell you this
| every time you mark yourself as 'looking':
|
| If the Board and/or the VCs ever get uncomfortable with the %
| of the company that is owned by ICs, they will just print more
| shares of stock.
|
| And don't get me started on preferred shares. Has any IC ever
| gotten those?
| pvarangot wrote:
| To add more fuel to the fire, in most if not all of the
| companies that switched to 1-year grants last year some
| director positions and all executive positions are still on
| four year grants.
| aledalgrande wrote:
| The options offer with no percentage ("we're giving you a very
| generous 80,000 options"), always blows my mind!!! And often
| even without a strike price!
| ProAm wrote:
| Always ask for a non-diluatable percentage early on.
| staysaasy wrote:
| I imagine that that would be really hard to achieve (or
| manage for the company) in practice, although I'd love to
| see a world in which employees could essentially get pro
| rata rights to purchase more shares built into their
| employment. That'd allow them to participate more fully in
| the upside of companies taking off like rocket ships.
| ska wrote:
| > employees could essentially get pro rata rights to
| purchase more shares built into their employment.
|
| I've seen this done, for what it's worth. Both
| contractually and ad-hoc.
| sokoloff wrote:
| It's reasonable to ask "what percentage does this represent
| on a fully-diluted basis?"
|
| It is entirely unreasonable to ask for a percentage of the
| company which can never be diluted by a future fund-raising
| round. Doing so just telegraphs that you don't know how
| venture funding/corporate finance works.
| HWR_14 wrote:
| How would they know what fully-diluted would be? Wouldn't
| there be unknown number of rounds at unknown valuation
| before liquidity? Or do you just mean based on current
| expectations. Because, if the latter, how do you hold
| them to that?
| sokoloff wrote:
| Fully diluted means if all _currently issued_ options,
| warrants, convertible bonds, etc are converted to shares.
| It obviously can 't account for future financing rounds
| which aren't even yet contemplated.
| dbt00 wrote:
| Fully diluted is not the same as future diluted, it just
| means including all the available options currently
| allocated but not exercised.
| ska wrote:
| > It's reasonable to ask "what percentage does this
| represent on a fully-diluted basis?"
|
| Not only reasonable, but you really should. If they won't
| answer it's a bad sign.
| [deleted]
| oogabooga123 wrote:
| I've scored deals that can't be diluted for X years after
| liquidity event, so employees should be able to as well.
| Don't put people down with "you must not know what you're
| talking about".
| azinman2 wrote:
| You'd have to be one hell of a hire to convince anyone to
| agree to something that will complicate all finance
| rounds going forward. I cannot imagine the average
| employee could get away with this.
| oogabooga123 wrote:
| It's as easy to imagine as it is to imagine a VC getting
| this kind of deal. The first employees are the ones who
| literally build the company and usually take far greater
| personal risk
| tyre wrote:
| I cannot imagine a competent and well-informed founder
| accepting an investment on these terms. Prorata is fine
| for larger investors, but explicitly undilutable is
| idiotic.
| sokoloff wrote:
| VCs can somewhat commonly get pro-rata rights in future
| rounds. That's quite a bit different from a guarantee of
| never being diluted.
| choppaface wrote:
| I got one of these and was dumb to accept because the finance
| department claimed the offer was legit. When I started, it
| turns out the deal to double the valuation to what they
| advertised... that deal hadn't been done yet. I left and it
| took another 6 months to do the deal and the valuation was
| lower than expected.
|
| If you're a VC harping on comp, spend your energy calling out
| frauds. Now that would be an actual public service.
| [deleted]
| johnthealy3 wrote:
| Agreed that it's right to be suspicious of the motives of any
| venture capitalist that makes a post like this (nothing against
| Fred Wilson personally). One thing I noticed at my last few
| startups is that the initial option agreements tend to have
| less diligence around them, say a very small strike price and
| more favorable terms on stuff like acceleration. Naturally,
| later-stage VCs would seek to skew the terms more in their
| favor, and redoing option grants yearly allows this to happen.
|
| On a more general note though, golden handcuffs can benefit the
| employee just because they are a guarantee. There's no
| possibility of future faking when it's up front and signed into
| a four year vesting schedule (e.g. "we'll give you a few
| percent next year but we need to get through this raise
| first").
| walshemj wrote:
| If Fred wanted to compensate employee shares he should be
| lobbying for banning some of the abuses dilution etc and for
| taxation only on a real gain
| bashang wrote:
| > live in your thoughts rent-free
|
| What does this cliche mean? "To be thought about?" It sounds
| like the kind of corny garbage I fled reddit to avoid.
| om2 wrote:
| What specifically is wrong with a comp model of one-year
| vesting (instead of 4-year) and no cliff? Whether it's better
| or worse for employees depends on how they size the grant and
| in general is very situational. If the company goes up in value
| a lot over 4 years, then yeah, the employee may lose out, even
| if grants are comparable in dollar terms at time of grant. If
| the company has more volatility than growth, or only modest
| growth expected, then annual grants with one year vesting are
| likely better. It definitely does not seem as obviously evil as
| backlighted vesting or underspecified stock offers. Is there a
| more subtle problem?
| heavyset_go wrote:
| > _Employees deserve high-quality equity on par with
| investors._
|
| There is no reason that labor and time couldn't build equity,
| it's just that our current system favors those who use capital
| to build wealth over those who need to sell their time and
| labor to build wealth.
|
| A common reason I hear for the fact that investors get more
| equity is because of the "risk" they take on, as if losing some
| money is the only risk on the table should a business go under.
| What is ignored, or outright dismissed, is the risk borne by
| those who invest their time and labor in a business for little
| to no equity.
|
| When a business goes under, the employees have just lost their
| abilities to feed themselves, keep a roof over their heads, see
| doctors, buy medicine and provide for their families.
|
| Workers sacrifice time that they can never get back working for
| one business when they could have spent that time working at
| another. While money invested can be earned back, employees can
| never earn their time back. Sometimes, those workers are paid
| below market rate while they help make a business successful,
| but don't see much or any equity as a result.
|
| It seems to me that there is more risk on the shoulders of
| employees than those of investors, and they should be
| compensated accordingly.
| nonameiguess wrote:
| The more amusing (or disturbing thing) is that we have
| created an environment where, practically speaking, investors
| have less risk than everyone else. We were just hit with one
| of the largest global disasters of the past century last year
| and the immediate reaction was flood equity markets with $3
| trillion to prop up financial markets. Owners of capital
| cannot lose.
|
| Even before these last few years of craziness, what I will
| never be able to get out of my mind is the story of Frank
| McCourt. I'm a lifelong Los Angeles Dodgers fan. He bought
| the team from Fox in 2004 and proceeded to treat a storied
| franchise in the nation's second largest city like it was his
| personal credit card. He didn't even use his own money to
| make the purchase. It was entirely with loans. He then
| proceeded to spend 8 years gradually bankrupting the
| organization until the league kicked him out and forced him
| to sell.
|
| What was his loss? Nothing. The team sold for 8 times what he
| originally paid, not because of anything he had done, but
| just because television contracts for the entire league had
| become so much more lucrative over that time. The man put up
| $0 of his own money and made $2 billion by being one of the
| worst team owners of all time and making the organization he
| owned literally bankrupt.
|
| I will never again in my life accept these econ theory
| gibberish about all the "risk" faced by business owners. If
| you own a salon or a restaurant or something, fine, I accept
| you might actually be out on the street. But if you're the
| right class of person that the banking system has accepted
| into the club, you can get infinite loans to buy whatever you
| want with no collateral, drive a business into the ground
| while spending the bulk of your time with hookers and blow,
| and make out with billions anyway.
| daveidol wrote:
| > _When a business goes under, the employees have just lost
| their abilities to feed themselves, keep a roof over their
| heads, see doctors, buy medicine and provide for their
| families._
|
| Yes, but that's always the risk of working at any company
| (and it's a risk the investor may also have if the company
| goes under). You can typically just get a new job and get
| these things back.
|
| I think an even more compelling argument here is the one of
| opportunity cost when working for a startup vs big FAANG
| company.
|
| Early startup tech employees not only invest their time but
| also lose out on _real_ money they would have earned at
| another (bigger) company.
| [deleted]
| lukevp wrote:
| I think you're hand waving away that money is a store of
| value, and indirectly of time spent. The money investors have
| also came from them creating value by doing some activity. It
| doesn't materialize independently. And it is still a risk to
| lose that money that they earned by trading their own time in
| the past.
| CerealFounder wrote:
| Your moralizing a non moral argument. Its simply harder to
| get access to someone else's capital than someone else's
| time. So people can charge a premium for the capital.
|
| I do believe that premium is probably a bit higher than it
| should be because it used to be EVEN HARDER to get that
| capital so people are pointing out the slightly outdated
| examples of cost in order to gain negotiating leverage.
|
| In the end our time and money have no intrinsic value, but
| try asking a friend to help you move and then try asking your
| friend to loan you money to hire movers and see which they
| are more likely to do.
| ithkuil wrote:
| Playing devil's advocate:
|
| But the employee's time is a replenishable resource (1 second
| per second).
|
| The Total risk is not losing your job. It's losing your job +
| struggling strongly to find another one (considering loss
| income while searching, stress, ...). Or workplace injury /
| death.
|
| An investor, while facing low to none risk of workplace
| injury / death, can permanently lose the investment and won't
| recover it ever (hopefully the investor hedges it with other
| investments)
| ska wrote:
| > It's losing your job + struggling strongly to find
| another one (considering loss income while searching,
| stress, ...).
|
| This is what severance clauses are for.
|
| > Or workplace injury / death.
|
| This is what insurance is for.
| ithkuil wrote:
| That was exactly my point. They are part of your
| compensation package. Surely there is a risk that the
| severance is not enough to cover for coping with a
| depressed job market.
|
| Investors operate outside of these parameters. When it
| works out well , lucky you; but if it doesn't work you
| lose. The parameters to make this a worthwhile venture
| must be set so that the reward is higher than when you
| risk less.
| dahart wrote:
| > Sometimes, those workers are paid below market rate
|
| I like this justification above all the others; it seems both
| fair and easy to reason about. If I quit a $200k/yr job to
| work at a startup for $100k/yr in cash comp, then my time
| investment, or risk, is $100k/yr, and my stock compensation
| should reflect that financial value based on today's
| valuation of the stock.
| ska wrote:
| > based on today's valuation of the stock.
|
| This is the tricky part, especially if you are very early.
|
| Really what you want is the (statistical sense) expected
| value of the equity be something like the opportunity cost,
| for it to make sense for you. But until the company has
| been around for a while and through a few rounds, valuation
| is mostly a fantasy...
| sokoloff wrote:
| If CxO and founder compensation is unreasonably too high, why
| not go become one of them (presumably founder is easier to
| self-select into)?
| HWR_14 wrote:
| Dumb question time: What's "IC". As you can imagine, the term
| is kind of overloaded in internet searches.
|
| Also, does anyone know of a good primer on equity
| founders/early employees/later employees should expect/require
| so they don't get totally taken advantage of? It turns out
| experience is an expensive teacher.
| deusex_ wrote:
| Individual Contributor, as opposed to Manager
| ericjang wrote:
| My general rule of thumb is that if the new comp arrangement
| isn't better in an obvious, predictable way, then it probably
| isn't better for the employee.
|
| I think it would be good for Fred or Coinbase comp team to
| provide the expected payoff calculations for various kinds of
| employees under this new scheme - the hard numbers and
| probabilities (even optimistic ones) would be what convince me.
| qdog wrote:
| The problem is unless you hold onto the stock, you are not tied
| to the long-term growth of the company.
|
| I think this is really trying to optimize to keep only the high
| performers without having to have a traditional stack ranking
| system.
|
| Interestingly, I recall the Google article about the highest
| performing teams not being made up of the highest performing
| individuals, but the best communicators. No one seems to be
| trying to hire to create the best teams, but still just the
| highest performing individuals. Perhaps there is a Moneyball in
| tech work.
| boldslogan wrote:
| one thing i think about, is hiring entire teams or groups at
| least of two to three instead of poaching just one person from
| a competitor/etc.
| pvarangot wrote:
| > the highest performing teams not being made up of the highest
| performing individuals, but the best communicators
|
| Not saying this may not be like, true in the ontological
| sense... but as an experiment it's shitty because they measure
| performance by how good you are at communicating what you did
| and what impact it had.
| darod wrote:
| Is he misusing the definition for "golden handcuffs"? From my
| understanding, the issue is that an employee has 90 days to
| exercise one's options. Most can't afford to do so if the company
| isn't public due to the cost to exercise and the tax burden. I'm
| not sure how this new options structure addresses that.
| itake wrote:
| There are many forms of golden handcuffs.
|
| Public companies gives you X dollars worth of shares at the
| current price of your start date over 4 years. Meaning if today
| the shares are worth $1 and they want to give you $100k of
| shares, then you get 100k shares over 4 years.
|
| If after 2 years, the unvested shares (50k) 3x in value,
| ($150k) you have to stay to continue to earn the same number of
| shares, but are worth 3x what they originally were.
| compiler-guy wrote:
| The term isn't very precise, but is generally taken to mean
| "promised future compensation". The 90-day rule for exercising
| illiquid options absolutely is one form of promised future
| compensation, but so are future options clearly in the money,
| or even highly-appreciated real shares about to vest.
|
| So he isn't misusing the definition, just using the broadest
| possible sense of the term.
| ska wrote:
| > Is he misusing the definition for "golden handcuffs"?
|
| No; in general "golden handcuffs" refer to any situation where
| future financial compensation counterbalances any desire to
| leave. You give one example, but there are lots of scenarios
| (it could as easily be pension qualification, or earn-out
| rights, or whatever).
| smilekzs wrote:
| From the linked article on Coinbase's compensation (
| https://blog.coinbase.com/how-coinbase-is-rethinking-its-app...
| ):
|
| > Because our standard offers are world-class, we are officially
| eliminating negotiations on salary and equity from our recruiting
| process.
|
| > We are OK if we lose some candidates due to this decision --
| the best candidates for Coinbase are those who are looking for a
| highly competitive package and are ready to let their
| contributions speak for themselves.
|
| I'm sorry but that's a self-contradiction (even oxymoron).
| "highly competitive package" these days is _after negotiation_ ,
| period. If you're 100% firm on the offer when asked, then people
| seeking "highly competitive package" (after balancing all other
| factors of course) can and will simply walk.
|
| As for the "let their contributions speak for themselves": For
| (especially early stage) startups, any promise to raise the
| compensation later *cannot be trusted*, period. It's not written
| on your offer (except for maybe "guaranteed/target bonus"), and
| the management could always come up with "budgets" --- basically
| handing out far less than what would make up for the initial
| compensation deficit, maybe except for a few people in the "inner
| circle". Having been both in and out of the "inner circle"
| myself, this difference can be significant over time. Also as the
| startup goes through funding rounds, company policy will change
| and the people who "promised" you will inevitably leave, etc.
| etc.
| flashgordon wrote:
| I wonder if this is a good thing for "early-ish stage startups"
| in the long run? If all big-cos start doing this (and since the
| first few players have already folded I dont see a reason for the
| rest not to) this may end up standardizing pays with no upside
| for the employees. So finally the risk-taking employees have more
| of an incentive to found or join startups. May be even better,
| since this kind of greed is (possibly) a by-product of the size
| more of the startups will be motivated towards more realistic
| exits instead of growth for the sake of growth!
| conjecTech wrote:
| This is horrific for employees. Ben Kuhn already nailed the math
| here[1]. The optionality embedded in long-dated grants is a huge
| fraction of total comp at high-growth companies and represent
| almost the entire right tail of outcomes. It also requires
| assumptions about the future, which is why companies generally
| abstain from quantifying what it's worth. It seems like the
| companies doing this are trying to arb that uncertainty by
| retaining all of the potential gain for themselves in exchange
| for a slightly larger nominal income.
|
| Don't do it.
|
| [1] https://www.benkuhn.net/optopt/
| analyst74 wrote:
| This is no different from how Amazon does targeted
| compensation, where rising stock price means you get less/no
| refresher and raises, or all-cash comp at Netflix.
|
| It's catering to more risk-averse candidate pool.
| Bulpi wrote:
| I don't mind Golden Handcuffs.
|
| Its just one part of a companies toolbox to increase retention.
|
| If you would tell me that i get my current additional bonus as it
| is without splitting it up to 3 years, i would of course take it
| but i assume that internally they were able to form/create this
| type of program and the 3 years was an internal bargain chip.
| kelnos wrote:
| > _[Golden Handcuffs are] one part of a companies toolbox to
| increase retention._
|
| Not in any way that's good for the company, though. That'd be a
| classic application of optimizing for the metric, not in what
| you really want optimized.
|
| Usually if an employee is staying solely or mostly because of
| the handcuffs, they're not producing their best work, and
| aren't fully engaged or focused. Do you really want to keep an
| employee like that around? Wouldn't you rather they left,
| voluntarily?
|
| On the flip side, as an employee, I _like_ the idea of golden
| handcuffs. In a hypothetical situation where I didn 't like
| where I worked, I could drop down to doing the minimal amount
| of work that wouldn't get me fired, and coast along while
| collecting the money. Sure, it's not a particularly fulfilling
| life, and probably wouldn't be sustainable for the long term,
| but maybe it's not that bad for a while.
| seasoup wrote:
| This is a plan that is much worse for employees, being presented
| as if it were better. At least be honest about feeling like you
| are paying employees too much equity up front and want to pay
| them less.
| bps4484 wrote:
| To me this all depends on how it's implemented but you're right
| to be suspicious.
|
| If all they do is give you 1/4 of the equity they were going to
| give you previously, then yes it drastically reduces employee
| upside to the benefit of others (execs, investors).
|
| But they probably can't do that because it would be harder for
| them to attract talent against a 4 year vest company. Instead
| they'll probably have to bump up that initial grant so that
| when employees do the math there is still the big upside if the
| company improves.
| pc86 wrote:
| I'm suspicious of this as well, but would this be better for
| a lot of employees? Go to Coinbase, get your 25% stock in 25%
| of the time, then "just" go somewhere else and get more. It's
| not unheard to return to a company later (Coinbase in this
| case) and get a better title, additional grant, etc.
| jsjsbdkj wrote:
| Basically this lets the employer retain more of the upside in
| stock appreciation - your equity bonus is now recomputed every
| year at the current stock price, and presumably expressed in
| dollars (not shares). So they'll say "oh you're getting 50k
| this year in stock", when you got 40k last year, but meanwhile
| the share price has doubled and your 40k in equity _would_ be
| worth 80k if they had given you all 4 years up front.
|
| They say it protects against downside, but odds are if the
| company isn't doing well they'll cut the dollar value of annual
| bonuses as well.
| pvarangot wrote:
| Not also pay them less. It turns out that for the average
| person sometimes this four year grants when fully vested are
| enough to retire or to switch to a job that pays less but has
| better WLB.
|
| They are paying people less because they want to keep them in
| the "golden handcuffs" for longer. The way it's painted by this
| particular VC is particularly gross.
|
| Also executives usually keep the upside potential. So as an
| engineer if because of your work the company skyrockets and
| becomes 8x more valuable over the year you share 0% of that
| upside, while executives cash in. On the downside, as an
| engineer you can just leave because the market is very fluid,
| truth is you don't need job security from your employer if you
| are a good software engineer. If/when that changes probably
| compensation will go down enough so that this mega-grants are
| not going to be a problem anymore. They are just counting
| pennies.
| compiler-guy wrote:
| "A bird in hand is worth two in a bush."
|
| This seems to make long-term ccompensation even more volatile.
| Who says the company will grant me a similar options package all
| 4-years. Business needs change, and it might do any of a million
| other things.
|
| Sure, the stock-price may go up, or may fall, but that is
| somewhat out of the day-to-day control of the company. Or it is
| much more out of the company's control than next year's personnel
| budget, where you just have to convince the CFO of what the right
| grant value will be.
| tourist_on_road wrote:
| I sense greed on part of coinbase. If coinbase doesn't want to
| have 4 year vest schedule which makes up a significant portion of
| salary, Why don't they follow what netflix is doing and just give
| out salary as full base salary instead of any RSUs.
| cddotdotslash wrote:
| Can we just link directly to the Coinbase post [1] instead of
| this 8-sentence blog spam?
|
| [1] https://blog.coinbase.com/how-coinbase-is-rethinking-its-
| app...
| dang wrote:
| Hmm - turns out it had a thread here -
| https://news.ycombinator.com/item?id=27119787. We could re-up
| that one instead, but it's not very good.
|
| Normally I'd agree with you and merge the threads or similar--
| but I'm not sure I'd call this post blog spam. It's true that
| it doesn't go deep, but he's raising a general question that
| isn't quite the same thing as the OP.
| 988747 wrote:
| Maybe I'm too cynical, but this "Eliminating negotiations from
| the hiring process" feels like they are saying "we are going to
| underpay you, severely"
|
| Negotiations are normal part of the process, if they try to
| eliminate it, they will simply not receive applications from
| the top candidates.
|
| Blaming it all on "women and minorities would end up underpaid"
| is a brilliant excuse.
| elefanten wrote:
| Thanks. This was much more informative.
|
| For those wondering, they're doing:
|
| -increasing comp targets to be at or above industry 75th
| percentile across the company
|
| -no negotiation for comp (standardized starting offer by
| location/role)
|
| -yearly stock grants with no 1 year cliff upon hire
| sokoloff wrote:
| "75th percentile of industry" is almost meaningless.
|
| Does industry include programmers at Comcast, Liberty Mutual
| Insurance, Staples, Smalltown Bank, Wipro, and everyone else
| who employs programmers in any capacity?
|
| Or does it mean Amazon, Facebook, Netflix, and Google?
|
| If you're beating three out of those four, your comp is
| excellent. If you're beating 3 out of 4 all companies who
| hire programmers, you're hopelessly uncompetitive with the
| "actual" top tech market.
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(page generated 2021-05-13 23:01 UTC)