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Comment by bigiain | Hacker News Reader

I think that's missing the point?

Coca Cola weren't and still aren't offering equity. Nobody describes that as "withholding equity".

Most places in the world, most jobs do not offer equity as part of compensation. And everybody understands that and chooses too apply or not based on what they are offering for compensation.

"pre-IPO unicorns" are very much the exception, very rarely actually pay off, and people who have the opportunity to shop around in that lottery should be grateful but aware that for every guy with an eight figure success story, they're are tens of thousands with some worthless option paperwork that never even made enough money to buy them a meal, let alone a house...

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I think the issue here though is the MC founders repeatedly used "we will never sell" as their justification for not offering equity.

People are allowed to change their minds. They did negotiate a pretty big employee compensation package as part of the deal. So I think OP was just trying to get a clickbait title and ride on the backs of those founders.

> People are allowed to change their minds.

But that doesn't make it ok when you specifically say you won't and use that as a justification for your actions many, many times in public. Title doesn't seem sensationalist at all.

> People are allowed to change their minds.

This is absolutely right, though sometimes it pisses people off when you do it.

I'm sure when they were coming up with that statement, they had never in their wildest dreams imagined that a 12 billion dollar offer would ever be on the table. There is not a single human being on earth who can turn down that kind of money.

> There is not a single human being on earth who can turn down that kind of money

Unfortunately for all of us there are a handful of people who, due to their own wealth, certainly can.

Sure it was the justification, but it makes zero sense as a justification. I’m not saying they should have offered equity, but I think logic is completely flawed and am surprised people bought into that logic.

No idea what KO’s employee comp plans look like, but since it’s public wouldn’t you rather get your comp in cash, and then decide whether to buy stock on the open market? Rather than the company make that decision for you?

The Coca-Cola Company actually does offer RSUs to employees.

I would be surprised if any large publicly traded corporation doesn’t offer some form of equity compensation to basically all employees with a six figure or higher salary.

The only lesson here is it is another data point in being very skeptical of someone claiming “we’ll never sell” in a compensation negotiation — if the founder(s) never plan to raise outside money or sell the company there’s very little downside to establishing an employee stock pool and awarding options to folks that may never be exercised.

It is in fact not the practice of most publicly traded companies to award equity outside the tech company, even to highly-compensated employees.

I don’t get a desire for stock - why would I want all my eggs in one basket. If my savings and my income are from the same company, and it does well, that’s great and I make a fortune

But if it doesn’t do well, I lose my job and have nothing to fall back on.

Surely it’s better to have a diverse portfolio?

One benefit is that stock is typically awarded in the form of a multi-year grant, where the number of shares is priced at the time the grant starts. So if the original grant says you get $X worth of stock per year for the next 4 years, and then the stock price goes up 40% in Year 1, you’re now effectively getting $1.4X worth of stock per year for the remaining 3 years.

To illustrate this, imagine at offer time, you're given $150k + $80k worth of stock over 4 years. That works out to $170k per year. Nice, but not even doctor money. The stock is currently $100/share, so that's 800 shares. Now imagine the stock 4xes (not unusual in tech). By year 4, you're making $230k, without having had to beg for a raise or anything. This is how people end up with ludicrous total comp in tech.

But if the company goes down in value you’re screwed.

Wouldn’t it be more sensible to buy options in your competitor and hedge your bets?

The taxes on equity are substantially lower than on salary. Also equity compensation can be an order of magnitude higher than any market-based salary would ever be.

The taxes on RSUs at vesting are identical to taxes on other income.

RSUs are equity.

If you get stock options, there are (very limited) circumstances where those options have favorable taxation relative to income, but it’s a gamble, if you follow the strategies that might yield tax advantages.

It's fairly common for execs (both in the US and EU), it's just framed as LTIs via phantom shares. Comparable to RSUs in philosophy, outcomes, and vesting schedules. Source: we sell software to run these programs.

When I worked at Cisco years ago fresh out of college, they offered an Employee Stock Purchase Program -- you could put up to X$ towards purchasing Cisco stock over the quarter, and the stock was issued at the end of the quarter at min(start_price, end_price) * 0.85.

I haven't worked at another large corporation since then but I thought that was fairly generous and I still have quite a bit of CSCO from that program.

Almost 50% of the s&p 500 offer ESPP and ~40% of the Russel 3000 do[0].

Given that, 401k stock contributions, ESOP & RSU I think we are right at the line of “expecting” equity as part of your comp for most public companies. It’s close enough that we can presume it’s a standard benefit anyway.

[0] https://rewards.aon.com/en-us/insights/articles/2020/how-com...

I mean, they give out <$300mn a year vs. Market Cap of $240bn[0]. Assume most of that flows to the top and it's basically 0.

[0]https://www.macrotrends.net/stocks/charts/KO/cocacola/stock-...

Slight tangent, but RSU's are "sudo equity" IMO. I'm not sure how the tax liability of RSU's works in the US, but in the UK they are treated as "income" and taxed as income, not taxed as "capital" as most other types of equity are.

As a result, I loose just over 50% of my RSU value to income tax when they vest.

It is the same in the US.

pseudo.

"sudo" means "super-user do", is pronounced "soodoo"

https://en.wikipedia.org/wiki/Sudo

Yep, gotcha. I actually meant "pseudo", but I spend a lot of my day typing sudo so...

and whilst we're nitpicking, I also meant "lose" and not "loose" in the sentence below.

I thought it was pronounced pseudo, thinking it's a joke. You're not actually the super user, you're a "pseudo" super user.

Typically in the US public companies sell RSUs to employees with a discount to the market price, so there is compensation for income tax.

No. That is ESPP. RSUs are, indeed, just taxable income linked to share price.

The fact that RSUs are taxed as income in no way means “they aren’t equity”, though, so this whole thread is just filled with bizarre inaccuracies.

I don't disagree with this. They are indeed a form of equity.

My issue relates to how they're treated with respect to taxation by the various revenue authorities. In the UK, the tax paid on RSU's vesting is related to the personal income tax bracket the individual falls into. Which means for anyone in the UK's higher tax bracket, you end up losing ~50% of the amount vesting as tax.

If these behaved like other forms of equity, ordinary shares, preference shares for instance, they'd be taxed as capital, the gains of which would be taxed 'when you sell them' and at a much lower rate of tax - ~50% lower for a UK higher rate tax payer.

I'd rather a company just pay me a higher basic salary than award RSU's. At least then it's both pensionable and often used as a multiplier at bonus/salary raise calculation time.

Agreed! If you can guarantee that you're going to get the same total compensation, compensation-as-salary is always better than compensation-as-RSUs.

Of course there's upside to exposing yourself to your company's stock performance, but there's also downside risk, which people looking at equity compensation tend to downplay.

Turns out its worked out well for big tech employees, as big tech has gone up 10x over not very many years.

But that's not a reliable state of affairs into the indefinite future for big tech, and it was never reliable for smaller companies.

Nitpick: "If these behaved like other forms of equity" I don't know what "behaved like" means in this context. You start out without equity. Then your company pays you equity. That's always going to be taxed as income, because it's transparently just income, just paid in a different liquid market.

Presumably the advantage of equity is also the ability to exercise some control over the business (the degree to which depends on the shareholder's agreements)

> "If these behaved like other forms of equity" I don't know what "behaved like" means in this context.

By behaved like, I actually mean't "taxed like".

You nailed it in your post. The employee is taking on increased risk with RSU's. Risk that is not rewarded with a more favourable tax rate, as other forms of stock (baring the same risk) are.

Yet, you're taxed as if the risk were the same as your salary. Which it isn't. (you'll probably still get paid even if the share price goes down, particularly in large companies).

I'm always wary of companies that try to explain away the relatively low basic salary with "look how many RSU's you're getting instead". Especially so, when they've already been though their initial growth phase. Amazon (AWS) is particularly bad for this in the UK.

Yeah I'm wrong, I was thinking of ESPP, not RSUs.

> Most places in the world, most jobs do not offer equity as part of compensation.

That's not the issue. Most jobs at companies that matter do.

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