Who wants to work for a company like that?
Posted: Mon Dec 23, 2024 10:40 am
Asking an employee to take a lower salary and offering unfavorable equity terms is not a winning strategy for any company seeking to hire great talent. Here are some reasonable equity plan options:
The company purchases the options for the employee, thus assuming the risk and saving the employee the cost of exercising the options.
The company lends the employee the money to purchase the options and is paid back when the options are liquidated.
The company extends the option period to 10 years (instead of 60 days) so that the employee doesn't have to exercise their options immediately and can hold them to see if their value increases over time.
All of these solutions are favorable to new hires since the option period is extended and the employee is not required to pay for the options upfront.
However, a potential employee may encounter an employer that plays hardball in these types of negotiations and presents them with unfavorable terms. In this situation, they should take charge and either walk away or enlist an agent or legal representation to help with the negotiations. It is easy to think that stock options won't matter in the long run, but then, why take a lower salary in the first place?
Sometimes a company isn't even willing to negotiate in these instances. A company's reluctance to compromise can be an indicator to employees of how it treats its employees. At best, it can signal a culture of rigidity; at worst, it can imply that employees may be exploited.
Your employees are the key to your success, and finding good ones is hard. When you finally find someone with the right skills who is also a culture fit, you should make sure they feel good about and are committed to new zealand phone numbers your mission. If you make a mistake, you do have recourse, though.
Smart entrepreneurs know that finding good employees is not possible without fair, clear and mutually beneficial employment contracts. They should not take advantage of would-be employees with unfair deals and convoluted contracts.
Potential employees who feel like a certain deal is unfair should consult with an expert. They should ask about the details of similar deals. The cash component of these deals is typically easy to understand; the equity component, not so much.
Types of equity compensation
Equity compensation comes in different forms.
Stock options
With stock options, employees can buy shares of the company stock at a preset price. In many cases, employees must wait to sell or transfer their options until after a certain amount of time has passed. This vested structure discourages employees from buying equity shares as they start their jobs, as instant equity access can give employees less incentive to stick with the business. However, stock options often expire after a certain date, so the employee will eventually have to buy them.
Restricted stock
With restricted stock, all recipients must complete a vesting period (this is only sometimes true with stock options). In most cases, restricted stock is offered as compensation to executives and directors rather than employees. Different restricted stock vesting periods may have different ramifications on the rights that executives and directors have as stock owners.
The company purchases the options for the employee, thus assuming the risk and saving the employee the cost of exercising the options.
The company lends the employee the money to purchase the options and is paid back when the options are liquidated.
The company extends the option period to 10 years (instead of 60 days) so that the employee doesn't have to exercise their options immediately and can hold them to see if their value increases over time.
All of these solutions are favorable to new hires since the option period is extended and the employee is not required to pay for the options upfront.
However, a potential employee may encounter an employer that plays hardball in these types of negotiations and presents them with unfavorable terms. In this situation, they should take charge and either walk away or enlist an agent or legal representation to help with the negotiations. It is easy to think that stock options won't matter in the long run, but then, why take a lower salary in the first place?
Sometimes a company isn't even willing to negotiate in these instances. A company's reluctance to compromise can be an indicator to employees of how it treats its employees. At best, it can signal a culture of rigidity; at worst, it can imply that employees may be exploited.
Your employees are the key to your success, and finding good ones is hard. When you finally find someone with the right skills who is also a culture fit, you should make sure they feel good about and are committed to new zealand phone numbers your mission. If you make a mistake, you do have recourse, though.
Smart entrepreneurs know that finding good employees is not possible without fair, clear and mutually beneficial employment contracts. They should not take advantage of would-be employees with unfair deals and convoluted contracts.
Potential employees who feel like a certain deal is unfair should consult with an expert. They should ask about the details of similar deals. The cash component of these deals is typically easy to understand; the equity component, not so much.
Types of equity compensation
Equity compensation comes in different forms.
Stock options
With stock options, employees can buy shares of the company stock at a preset price. In many cases, employees must wait to sell or transfer their options until after a certain amount of time has passed. This vested structure discourages employees from buying equity shares as they start their jobs, as instant equity access can give employees less incentive to stick with the business. However, stock options often expire after a certain date, so the employee will eventually have to buy them.
Restricted stock
With restricted stock, all recipients must complete a vesting period (this is only sometimes true with stock options). In most cases, restricted stock is offered as compensation to executives and directors rather than employees. Different restricted stock vesting periods may have different ramifications on the rights that executives and directors have as stock owners.