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Employee Stock Options?
Evil Butters asks: "ComputerWorld has an interesting article regarding the decline of Employee Stock Options. Long gone are the days when companies would pass out stock options like toilet paper (as you were lucky if it was worth as much). Since most of us are probably in IT related fields, is anyone seeing any turn-around in compensation packages -- especially for IT folk? Everywhere I look, companies are still cutting back and finding reasons why compensation does not need to be increased (except for CEO's of course) no matter what your performance is like. But according to the article, 54% of the top S&P 250 companies are (at least) using restricted stock as performance perks, etc."
This is all about the taxes, and accounting. Options were great because they were paid for by investors, not the company. That's changing soon.
Now they need ways to pay non-salary money, that comes from nowhere - print more stock!. And they may as well do things that keep you around longer as they do it. Luckily, printing more stock still doesn't cost the company any money, it's from the current investors that get diluted.
It's getting really hard to pay your workers with other peoples money!
- Adam L. Beberg - The Cosm Project - http://www.mithral.com/
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But being able to buy a 9 year old stock option when it has more than tripled in value is pretty sweet. Plus you tend to keep it then. This leads you to accumulate wealth rather than piss it away on the latest doodad or geegaw. So it is good for you and your company. You company benefits because it does change your outlook when you own a good sized portion of your company. Of course the down side is obvious. If the stock hasn't gone up since it was issued.... well you know. That sucks then.
When there are more people than jobs, they don't have to pay you what you're worth, because there's someone out there, probably equally or more qualified, willing to work for a lot less.
On the contrary, they have to pay you exactly what you are worth, you are just worth a lot less than you think you are... Your worth (at least in $ terms) is defined by the market.
"I'll have a Guinness, no wait, make that a Coors Light" -Grad student I work with, who shall remain anonymous...
You're essentially getting paid in risk rather than money. You're taking the risk that your bonus will be worthless, vs. the possibility that your options will have tripled in value at some time in the future.
I think for most of the people I've worked for, I'd rather have $1 now than the possibility of making either $0.01 or $3 in the future.
I am a three-time loser in the stock-option arena; 1) early 80's "100,000 shares - at $10/share that's a million". Worthless. 2) Mid-late 80s - "hey you have 5% of the company stock!". Worthless. 3) "Recent" dot-bomb. 'nuff said. Worthless.
You are far better off negotiaing a fair wage, fully funding your IRA, 401K, SEP IRA, what-have-you. Hey, take a flyer once-in-a-while, if you can afford it, but remeber, it's like playing the lottery - "you can't lose if you don't play".
Paying quarterly taxes is a bitch, getting big fat gross checks is what everyone should get to realize how much we pay in taxes, if you pay your taxes without withholding. If you make even a little bit [I pay over 50K USD year in taxes and don't feel "rich", don't drive a BMW, don't vacation in exotic places...] you see how much "the rich" pay in taxes.
This issue is a bit more complicated than you think.
Well, the reason we're worth 50-60% of where we were 5 years ago is BECAUSE there are people out of work that would be willing to take a deeper cut in pay to be employed. This is certainly true in the northeast. And let's not talk about the lack of raises. The market has slumped and is very flat and a lot of good people are still unemployed or under-employed. It's gone from a seller's market in the 90s to a buyers market now, and there isn't a lot of buying going on.
On the contrary, they have to pay you exactly what you are worth, you are just worth a lot less than you think you are... Your worth (at least in $ terms) is defined by the market.
Not so. That's a really oversimplified view of economics.
Let's say an engineer can generate $100k/year worth of profit for me, after overhead. Let's say there are lots of engineers out there willing to work for $10k/year. How much are those people worth?
See the thing most economics classes neglect to point out is that by manipulating your costs and benfits you can pretty much get any answer you want while applying an oversimplified model to a complex situation.
Your comment reminds me of a joke:
Two economists are waliing down the street and one sees a $20 bill lying on the ground. He goes to pick it up and the other one calls out:
"Wait, don't bother!"
"Why not?"
"Well if it was worth pikcing up someone would have already done it."
See my point? In the REAL WORLD it IS possible to buy something for less than its worth.
A particular oversimplified view of the world might say that no one would ever leave a $20 bill on the ground unless it wasn't "worth" picking up, but that's an obviously silly assertion. In the real world things that are not economically "optimal" happen every day.
For a final example of the sillyness of your statement consider the worth of someone who is unemployed. Are they really worth $0/day?
Or, is unemployment itself an example of "market failure"?
See that's the funny thing here:
The same theories that say that a person is worth what the market is willing to pay, also predict ZERO unemployment.
I'm not claiming the whole science of economics is BS, BTW. The points I'm making are (IMO) why there is an actual division between microeconomics and macroeconomics.
When you look at things on a large scale, it becomes painfully obvious that none of the models being used are actually "true". They're more like trying to fit a polynomial to a set of datapoints.
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