Now You DON’T See It

untitled13The image below is from a recent post by famed author and Behavioral Economist Dan Ariely. Take a quick look to see if you can figure it out in 30 seconds or less.

Ariely2Reports tell us that 55% of people spend less than 15 seconds reviewing any piece of content on the internet. I have given you twice as much time. Have you figured out the answer?

It is said a picture is worth a thousand words. The digital medium we all use today makes sharing images easier and Continue reading

ESPP: The Ugly Duckling?

untitled 37We’ve all heard some version of Hans Christian Andersen’sThe Ugly Duckling at some point in our lives. For the record, the original is sadder and more intense than I remember. The summary is this. A bird is hatched. It is ugly and misunderstood. Others ostracize it without even knowing what it is. It doesn’t fit well anywhere and often has to make its way. Later it grows into a beautiful swan, and everyone admires it. The end.

Welcome to the world of Employee Stock Purchase Plans (ESPPs). If you are at a company that is not publicly traded or is unlikely to ever have an IPO, this post may be Continue reading

Entertaining Ways to Apply Executive Pay Rules

untitled 54Executive compensation is always in the spotlight. The pay levels for the highest paid executive can truly be astounding to “regular” people. In truth, they are often astounding to executive compensation professionals, including the consultants who make the recommendations. In general, most pay packages can be justified as being competitive in the market, or a small percentage of the value of the company or based mainly on the performance of the individual and/or company. This type of justification often rings hollow.

What if we applied some of the current “best practices” to nontraditional professions such as entertainment and sports? Dwayne “The Rock” Johnson is the Continue reading

Compounding Our Pay Problems

untitled 2The pay ratios between CEOs and average employees are once again in the news. This is partly because proxy season always raises this issue and partly because there is a move in some circles to do away with the new pay ratio disclose rule that is part of Dodd-Frank. This year’s ratios will likely be bigger than last. The same will likely be true for most years in the foreseeable future. Here’s why.

The average annual increase for the average employee has been between 2.6% and 3.2% for several years. The use of equity compensation and other long-term compensation tools went down over at least the past decade. At the same time, executive base pay has increased between 5% and 8% most years over most of the past decade. During this period, the use of Continue reading

Let’s All Do Nothing About Pay

untitledAre we really doing anything? We create salary structures and write job descriptions. We organization our data and provide reports up and down the organization. We do a lot, but how much of it is making us competitive in a tight talent market?

The “annual Increase.” Sometimes we even call it a merit increase. According to one study, at the beginning of 2016 companies predicted their pay budgets would increase 3% and at the end of the year they reported the actual increase was 2.6%. Similar reports from several prior years had Continue reading

Startup Equity: Comparing Your “Currency” to a Competitor’s (Part 4 of an n part series)

untitledComparing base bay is relatively easy, equity not so much. A dollar is a dollar. And, if a dollar isn’t a dollar (let’s say it’s a Franc), there are published exchange rates to help convert values. But, with equity compensation, the base currency is your stock, and its value is not easily translated (or even agreed upon). This fundamental disconnect is one of the most challenging issues faced by anyone dealing with equity compensation at a start-up.

Let’s start with the oversimplified example above. There are exchange rates from dollars to francs, but they are not as consistent as the prices available for Continue reading

Startup Equity: Why are VCs Getting so Stingy with Equity? (Part 3 of an n part series)

6a0134836082f8970c01b7c8b0ac08970b-200wiDoes this familiar?

You had a great idea and turned it into a company. Somehow you got to the point where Venture Capitalists were willing to invest. You may have had less than 50 employees and less than 15% of the company committed to non-founder employees. You grew and kept innovating. Equity compensation was the currency of the day and the hope of tomorrow. Your value grew and more investors came on board. Then the equity spigot became a trickle.

What’s up?

Many VC returns have shrunk in 2016. When VCs see their value melting, they react exactly as you might expect. They become more Continue reading

Startup Equity: 409A vs Investor Value (part 2 of an n part series)

untitledfWe have all seen the headlines, “XYZ receives $100M in funding at a $3B valuation.” We seldom see the “other” valuation showing the same company is worth $350M. For publicly-traded companies, value is determined by investors working as a group in a real-time market. They are generally purchasing the same kind of stock. Values are based on a combination of publicly disclosed information, supercool computer models and gut feel. But in the world of the pre-IPO start-ups, values take on a life of their own.

Investors in startups are buying stock with more risk and more upside potential. Companies only sell stock to investors on Continue reading

Broadway Acts on Sharing Success

untitled12You build it. You buy it. This may become the new mantra on Broadway. The original cast of Hamilton was recently followed by the new cast of Disney’s Frozen in receiving a share of the success of the shows they helped create. Similar to a great tech company building towards an IPO, a Broadway company has to do a whole lot of work before it ever gets to the starting line. Beyond the original idea, words and songs are the testing, tweaks, enhancements and embellishments that can make or break a show.

For years the formula worked like this. Continue reading

Applying Pixar’s “22 Rules of Storytelling” to Pay

untitledWhat do ‘Up’, ‘Cars’, ‘Inside Out’, ‘Monsters, Inc’, ‘Ratatouille’, ‘Toy Story 3’, ‘The Incredibles’, ‘Finding Nemo’, ‘Toy Story’ and ‘WALL-E’ have in common? First, they are 10 of the best animated movies made by Pixar. Second, they all follow Pixar’s “22 Rules of Storytelling.” As it turns out, these rules adapt well to the world of compensation plans and philosophy. Continue reading