> Same reason anyone wants a union: to reduce structural asymmetry. In this case, the asymmetry in question is information. Think of the hypothetical union as you and your coworkers all pitching in to get a really good lawyer to review your employment contracts and vesting terms.
That's fine for those other people. And a common fund for a lawyerly review might be an interesting idea. In general, I don't want to pool my negotiations with other people, though.
> More importantly, because of the issues with equity, even those scarce observations are fuzzy. Comparing two equity packages from non-public companies is hard, and it's ridiculous (or, depending on your interpretation, cunningly malicious) to put that burden on every single employee individually. You're paid to be an expert in software engineering and a partial domain expert in whatever the company does; having to also be an expert in finance and obscure tax law to even know how much you're getting paid is unreasonable.
I resolve that difficulty by valuing all equity (or options etc) of non-public companies at a huge discount when comparing offers.
I don't treat exactly as if they were worth zero, but pretty close.
Slightly more specialised: in tech it seems to be common to grant employees at-the-money call options. The put-call-parity is your friend here (https://en.wikipedia.org/wiki/Put%E2%80%93call_parity).
A special case for that parity equation is:
put option + equity = call option + cash (at current price of equity)
In our case with both put and call having a strike at the current price of the equity.
More or less it says that a call option is exactly as useful as the insurance against the company going bust, ie the put option.
There are basically two ways for the call option to be worth more than peanuts:
- Either, the founders were idiots and sold the last round of equity too cheap (ie the strike of the call option is too low)
- Or, the share price is fair, but the company has a very high risk of going belly up (ie the put is worth a lot)