Question (Orig. on Quora):
Since RSUs makeup for major chunk of their future savings, do Googlers feel insecure about stocks dropping significantly ? For example, LinkedIn stocks lost their worth significantly overnight. Do Googlers sell immediately or reinvest into other venues or just hold onto them ?
Answer (by Dan Walter):
I think if “Googlers” as a group did mainly the same thing, the would be deemed far less intelligent than expected.
Doing the “right thing” with RSUs depends on many factors. Some of these are personal, some are market driven, some are income and tax driven and still others are driven by psychology.
Here is what the smart people do.
1) Long before their RSUs vest they take advantage of the financial education and planning opportunities offered by the company or recommended agents.
2) As their RSUs vest that look at the current market conditions, the plan put together with their financial advisor and any indicators of how things may change.
3) They also look at their current cash position, their current concentration of Google stock, and related industry stock as part of their portfolio.
4) They look at what other vesting events may be occurring in the near term future.
5) They look at any potential cash payments they may be receiving soon.
6) After all of that they make a determination to keep or sell the share delivered after vesting. This decision will be different for different people and will be different for different vesting dates.
They key to equity compensation is being well educated about your awards and the choices surrounding them.
In my more than two decades of working on these programs I have found that perhaps a single digit percentage of ALL equity holders truly utilize these awards well. It should be noted that this single digit percentage is across all companies. This means that, at many companies, the percentage is below the fraction of 1% and at others it is quite high. This is mainly due to the amount of time, effort, passion and money the company spends on educating people. BUT, individuals can get much of this information on their own, even if their company is relatively silent.