The Coca-Cola Company actually does offer RSUs to employees.
[0]https://www.macrotrends.net/stocks/charts/KO/cocacola/stock-...
As a result, I loose just over 50% of my RSU value to income tax when they vest.
"sudo" means "super-user do", is pronounced "soodoo"
and whilst we're nitpicking, I also meant "lose" and not "loose" in the sentence below.
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.
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.
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.
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.
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.
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?
Wouldn’t it be more sensible to buy options in your competitor and hedge your bets?
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.
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.
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...