A New Grad Schools Us on Performance Management

6a0134836082f8970c01b7c870d73d970b-800wiThis is my first non-equity focused article in a few months but a high school graduate inspired me to change direction this week. The video below shows the valedictorian speech at the high school graduation of a friend’s kid. It’s five minutes well spent, but here’s s snippet if you are in a hurry.

“No matter how many details I give I will not able to express the full truth about today…As much as I would like to say that I was chosen because of my hard, dedication and intellect, I would be far from truthful in doing so because I have met and studied with individuals more diligent and talented than myself… 4.63. This three digit number is the reason I stand before you. But, what does it really mean? My GPA is just an artificial number meant to measure my academic prowess.”

And that’s where it starts getting really good! In the next section he tells you why Continue reading

A Small Problem for Compensation Professionals

6a0134836082f8970c01bb090d7e4a970d-200wiThis 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.

Don’t get me wrong. There are some Continue reading

Why Equity and Not Just a Bigger Salary?

6a0134836082f8970c01bb0904b74f970d-200wiThis February, the Harvard Business Review published Stop Paying Executives for Performance” by Dan Cable and Freek Vermeulen. The basis of the article is that we do away with all executive incentive pay and replace it with high (in cases much higher) salary. Their argument is that there is no evidence that pay for performance works and some evidence that it is dangerous. Since this post is part of my ongoing “Stock Options on the Precipice” series (earlier articles: 12345678, 9, 10, 11), I will try and focus only on that one aspect of incentive pay. Perhaps some of you will add additional information in the comments.

Note: We are not arguing that top managers such as CEOs should be paid less. That may very well be the case too, but that’s not the focus of our analysis. HBR , Cable, Vermeulen, Feb. 2016

Let’s start with the premise that pay for performance does not work. There is Continue reading

UPDATE ISS Equity Plan Scorecard EPSC 2.0

untitled3Have you ever played a card game with 5-year olds? Before you start, they explain the game in vague details and provide a list of rules that are customized to their needs. Then you begin playing, doing your best to remember the rules and keep the game moving and fun for everyone. STOP!

The game is no longer fun. The 5-year has just realized that one of their rules is not beneficial to them. Because they are a kid and generally pretty darned cute, you allow the change of how the rules apply to them without comment (yet you must continue following their original rules). It doesn’t take long for Continue reading

What’s Equity Really Worth?

untitled2We 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

The Lorax Explains Equity Compensation

untitledAt the narrow end of an IPO spike

where the stock market slows

and the stock options lose value and the investors say no

and RSU vesting periods continue to grow…

is the street of the equity Lorax.

And deep in this narrow place, some entrepreneurs say,

if you look deep enough you can still see today,

where the bubble once stood

Just as long as it could

Before somebody lifted the funding away.

 

What was the Equity Lorax? Continue reading

“Employee-Friendly” Equity Compensation

6a0134836082f8970c01b7c82ab74a970b-200wiIn this sixth installment of my “Stock Options on the Precipice” series (other articles: 1, 2,3, 4, 5), I will cover some common concerns employees have about equity compensation. The term “employee-friendly” equity compensation has become popular over the past couple of years. What does this mean and do the people using the term actually understand the purposes and technical issues surrounding equity compensation? More importantly, is there equity compensation that isn’t employee-friendly? Lastly, what should you be doing about it?

Part of the inspiration for Continue reading

Equity Compensation: I Have the Cure You Seek!

6a0134836082f8970c01b8d1aeb429970c-200wiIs your equity program on the fritz? Are your stock options in the dump? Could your RSUs use a bit more pep? Are your stock appreciation rights feeling a bit more like wrongs? I have got the cure for what ails you!

Like the snake oil salesmen of yesteryear there is always someone pitching some unique feature or approach that will solve all of equity compensation’s potential problems without having any side effects. And, just like the people who purchased those sometimes poisonous and sometimes pointless solutions, the buyer had better beware!

Welcome to another installment in Continue reading

How to Determine Equity Grant Sizes (it’s probably not what you think)

6a0134836082f8970c01bb08c1f798970d-200wiDetermining grant sizes or values is Part 4 and the next challenge in my ongoing series, “Stock Options on the Precipice”. At some point, you will arrive at a place where you will need to determine award sizes. There have been times where this was less difficult than it is right now. And, there will never be a time where this is as formulaic and consistent as base pay amounts.

The first question is whether grants should be based on a percentage of the company, a given number of shares or options or a dollar value converted into a grant amount. Much of this depends on Continue reading

11 Reasons Your Equity Compensation Survey Data is Wrong

6a0134836082f8970c01b7c8191c03970b-200wiPart 3 of my ongoing “Stock Options on the Precipice” series.

How much equity should I give (or get)?

It’s probably the most common question I get asked. The answer, as I am sure you know, is “It depends”. And, with equity compensation the final answer is even squishier than other types of compensation. Data seems to be all over the place. Trends appear to vary based on who is providing them. It often feels like survey data is pulling companies in specific directions, when it should be reflecting directions that have already been taken. What in the heck is going on?

You haven’t lost your mind. Equity compensation really is Continue reading