[LRUG] Equity/Stock/Share Options: Survey

Mon Aug 4 11:01:23 PDT 2014

That's all well and good if you're still employed by the company when the liquidity event occurs. If you leave before then you have to exercise yourself. Most of my experience is with the US though, and the tax treatment is non-trivial to understand and has caused significant financial pain for no gain for a few acquaintances. I'll refrain from going into specific issues until Sam has closed out the survey for fear of tainting the results.

On Mon, Aug 4, 2014 at 7:32 PM, Evgeny Shadchnev
<evgeny.shadchnev at gmail.com> wrote:

> Glenn,
> It may seem strange at first but there's a good reason for this. Also, it's
> not nearly as bad as it seems.
> The reason is that the right to buy something cannot be taxed, whereas
> shares can. So if a business gives shares to the employee, HMRC will expect
> the employee to pay taxes today, even if the shares cannot be sold yet.
> This is why EMI exists: you get the right to buy the shares but you cannot
> be taxed until later (and only at 10% instead of a normal rate of twenty
> something).
> The reason it's not as bad is because normally during a liquidity event the
> purchase and the sale would happen on the same day without you having to
> provide any cash. I went through this process twice and on both occasions I
> just received the net difference between the strike price and the share
> price at the liquidity event.
> On Mon, Aug 4, 2014 at 3:24 PM, Glenn Gillen <glenn at rubypond.com> wrote:
>> The pattern I've seen most regularly and that I find particularly
>> distasteful and borderline exploitative is below market rates and "equity"
>> in the form of options. So not only are you taking a pay cut, but at some
>> point in the future you need to find additional cash to exercise those
>> options and actually get your equity.
>>
>>
>> On Mon, Aug 4, 2014 at 3:24 PM, Louis Goff-Beardsley <
>> louis at infinitiumglobal.com> wrote:
>>
>>> Hi Sam,
>>>
>>>
>>>
>>> My experience with companies offering equity etc in companies as part of
>>> a package are as follows:
>>>
>>>
>>>
>>> ·         Regularly get companies asking me I can market mid & senior
>>> developer positions with a below market rate salaries but with significant
>>> equity. Usually its companies at a fairly early stage that are interested
>>> in this sort of proposition. Rarely do these roles get filled with this
>>> sort of package. Reasons for this are:
>>>
>>>  o   The £10k-30k that developers would lose essentially would result in
>>> a significant drop in immediate lifestyle.
>>>
>>>  o   The chance of a payoff with the equity being worth something is
>>> pretty risky, with more tech start-ups failing than succeeding.
>>>
>>>  o   Most Upper-mid and above developers will usually have picked-up
>>> various bits of equity from all over the place throughout their career,
>>> often can be jaded about its value. Only a few times I’ve met developers
>>> who took equity and it paid off.
>>>
>>>  §  That being said I’ve met a few developers where its paid off and
>>> they’ve used that money to bankroll their own projects.
>>>
>>> ·         When a company is offering market Salary rates + equity as
>>> part of total package it’s a lot more easy to market them. Often it can be
>>> the deciding factor when candidates are choosing between roles.
>>>
>>>  o   Obviously people are more included to stay with the company longer
>>> due to the Vesting/Cliff structure.
>>>
>>>  o   Good way of getting employees to care about and feel invested in
>>> the success of the business.
>>>
>>>
>>>
>>> To summarise:  Most people wouldn’t like to spend a significant portion
>>> of my wages on scratch cards, but would be attracted to them if given on
>>> top of a regular salary.
>>>
>>>
>>>
>>> Best, Louis.
>>>
>>>  -
>>> * Louis Goff-Beardsley*
>>>
>>> *Ultra-specialised Independent Ruby Recruìtment*
>>> https://www.linkedin.com/in/louisbeardsley
>>>
>>> *"I just can’t stop thinking about Ruby on Rails"*
>>>
>>> *Mobile:* 07449 324 851 *BBS:* 0118 327 1821
>>>
>>> *Skype/Googletalk*: LouisGB1/LouisRoR at gmail.com
>>>
>>> @LouisRoR <https://twitter.com/LouisRoR>
>>>
>>> irc.freenode.org - LouisRoR - #Ruby #LRUG #NWRUG #Pokemonchat
>>>
>>>
>>>
>>> *From:* Chat [mailto:chat-bounces at lists.lrug.org] *On Behalf Of *Sam
>>> Phillips
>>> *Sent:* 02 August 2014 12:01
>>> *To:* London Ruby Users Group
>>> *Subject:* [LRUG] Equity/Stock/Share Options: Survey
>>>
>>>
>>>
>>> Hi LRUG,
>>>
>>>
>>>
>>> I've had a few anecdotal conversations about equity (option) schemes over
>>> the past few years and the way that they work in practice with real people
>>> in real companies where relationships are sometimes complex.
>>>
>>>
>>>
>>> I'm not so much thinking about whether or not these schemes are a good
>>> idea or worth sacrificing salary for.
>>>
>>>
>>>
>>> I'm hoping to come up with a more definitive view on what's going on so
>>> have put together a simple survey. If you are part of a company option
>>> scheme, or have been in the past, and could spend 2 minutes (it's 10 quick
>>> questions) on it, that would awesome.
>>>
>>>
>>>
>>> https://www.surveymonkey.com/s/MFFGZSH
>>>
>>>
>>>
>>> My motivation is to see if there are are trends in the way things are
>>> happening and to allow us to share our experiences. My (broad) hypothesis
>>> is that implementation of these schemes in practice is inconsistent across
>>> companies. My detailed hypothesis I'll reveal when I have some data :)
>>>
>>>
>>>
>>> I'll be sharing anonymised raw data (providing I actually get some, and
>>> participants agree), and will hopefully be able to break this down with
>>> some basic analysis too.
>>>
>>>
>>>
>>> As a few of you know, I'm not a statistician, so this is not very
>>> scientific! Any feedback on how to better collect this sort of data is
>>> happily received although I'll probably not want to change the questions
>>> half way through the sample period (again, you can tell me different if I'm
>>> wrong!).
>>>
>>>
>>>
>>> My aim right now is simply to get more data, learn more about what's
>>> going on, and to maybe start an open conversation on the topic.
>>>
>>>
>>>
>>> If you could take two minutes, that would be ace. Thank you so much!
>>>
>>>
>>>
>>> Sam
>>>
>>>
>>
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