The historically long periods between the startup and “big event” for companies has given rise to many issues that were never considered when stock options and other equity tools first became the preferred startup incentive tool. Among these unplanned issues are things like:
Wealth inequality between the first 20 employees and employee 5,000 or 12,000 or more
Grants expire when the company has not yet made its move to IPO
Dilution and burn rate issues long before IPO
Grants becoming stale
Downward movement in stock prices
(Ugh, this list can take the maximum 800 words allowed for this post)
This post we will discuss the controversial issue of “refreshing” grants for long-term employees. To clarify, these are not grants for promotions or company-wide performance. These are equity compensation awards that are given simply because Continue reading →
A friend of mine likes to say: “It’s not that incentive pay doesn’t work well, it’s that it works TOO well. It usually does exactly what it is designed to do, even if that wasn’t your intent.”
Wells Fargo just paid $185Min fines and penalties because its employees fraudulently opened additional accounting for people who were already customers. Often when issues like this arise, someone will blame pay programs. When this happens, compensation professionals usually Continue reading →
Before there were photographs, sailors would return from long trips and describe animals to artists who would then create “official” images. These images helped people feel like they understood what was “out there”. But, in reality, provided almost no useful information. Check out the drawing of the rhinoceros.
You get reports from the Big 4 and compensation consultants. They have pretty charts and easily digestible info-bites. You get market data from survey providers and professional organizations. They include tons of little boxes of information on enormous spreadsheets. There is enough granularity to make you feel like you have everything and can build anything new with grains of sand that are at your fingertips. You have articles from established and new media. They provide insight and new perspective that allow you stay ahead of the trends. You follow twitter and read blogs.
But how much of what you know is factual? You may be surprised.
Other professionals in HR, compensation and investing frequently ask why I am so passionate about changing the way companies use equity compensation. They point out that the majority of companies follow the same path and many companies (as well as many individuals) have been very successful with the current paradigm (see below for a quick summary). Why mess with something that seems to work at least some of the time?
This is not the article I intended to post today. I had something else ready to go, but realized this was more important. I am sitting in my hotel room in San Diego, California getting ready to head over for the second day of the annual WorldatWork Total Rewards Conference. Total Rewards is a BIG category.In three days it is not possible to dive into every type and flavor of “reward”. But one important family of compensation, equity, is almost completely missing from this year’s event.
On May 7, 2016, it was reported that a giant chrome panda predicted the imminent crippling of stock options in the Silicon Valley. Dropbox has been a star of the unicorn sector. But, in October of 2015 and again in April of 2016, their value was written down by major mutual funds, including Fidelity. With their unicorn value and subsequent write down, they have become a high tech “canary in the coal mine” for employee stock options.
Just last month Dropbox moved into new digs in San Francisco. In their lobby, they installed a giant chrome panda (their mascot) that is meant to welcome guests with an iconic Bay Area flair of irreverence. The bad news is Continue reading →
Let me start this by saying that there is little new in this post. If you have been a senior compensation professional during a market downturn, this should sound familiar. If you have not had this exciting and seldom pleasant experience, buckle up and let’s go!
The main selling point of equity compensation is that it provides unequaled compensatory upside through its extreme variability, while allowing a Continue reading →
A report from 24/7 Wall St. touting the “25 highest paying companies in America” is being passed around the internet as factual news. Unfortunately, like so many compensation stories, the report is all sizzle and no meat. People love to cheer or complain about pay. The list that was provided makes it easy by using “facts” that are not really “facts”.
We all know that equity compensation is the driver behind the astronomic growth in executive compensation. We all know that it is also the reason that tech lords make millions before the tenth year of their careers. It is the reason that the average home in San Francisco and San Jose is more than $1 Million. We all know that these things are true because we have all read or heard the stories. What if these stories were only partially true?
What is equity compensation REALLY worth? How do you know how much to give? How do your employees know how much they are getting? What truly drives, impacts, reduces and magnifies this value? In this post, Continue reading →
San Francisco just became the first city in the US to ensure 100% paid leave for new parents. This covers both mothers and/or fathers. This new rule is effective January 1, 2017 for employers with more than 50 employees. Companies with between 20 and 49 employees have until January 1, 2018. While this is a great thing, is it just another reason to avoid hiring Millennials? Perhaps this is all a conspiracy to improve the long-term retention of baby boomers.
55% of parental pay was already covered by a statewide initiative. Companies will be responsible for Continue reading →