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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."
Call me old fashion, but I believe the old saying "One bird in hand is better than two in the bush".
My preferred compensation is profit-based bonus. So if a company is making profit, employees share the pie, it's like dividends to shareholders except you hold your "shares" in the form of employment/position.
My company's doing an incremental performance bonus, so if this month's profit is up compared to previous month, you get some money added in the bonus pot, and the size of bonus depends on the % increase. This is ideal for employers because it ensures growth, but employees could be working just as good for 5 years in a row, but with the last 4 years without bonus.
Rock that crushes, Paper & Scissors that don't matter.
So I just saw a post that says IT jobs are getting harder and harder to find .. and now this one complaining that compensation packages are going down.
Do we need to go back to Economics 101 ??
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.
The days of being overcompensated are over. Count your blessings if you're paid market average (which no longer includes options). Don't like it? Start your own company.
-- People who hate Windows use Linux. People who love UNIX use BSD.
...is not getting the job outsourced to India.
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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... Four years ago I remember reading in TechWeek that landlords were demanding security deposits in dot com share options, rather than cash.
I wonder if they are still making such demands?
Vintage computer adverts: http://www.vintageadbrowser.com/computers-and-software-ads
Mature companies like Microsoft have switched from options (who really thinks their stock will increase enough to make the options valueable?). Instead, they favor giving stock awards; basically like a bonus.
Large public companies mostly still have employee stock purchase plans, allowing employees to buy company stock for ~10% discount.
I don't really see the great charm of stock options, specifically as part of your employment renumeration. Options are a crap shoot even at the best of times - a lottery if you wish. Since you're depending on it for stuff like food and housing, work compensation should be as predictable as you can make it. You want to reward me at an IPO - set me up for a hefty end-of-year bonus instead.
You want excitement - use a bit of your own salary to buy a lottery ticket (or some small-business shares). Or start a business of your own, and get all the pre-IPO excitement you can handle.
Trust the Computer. The Computer is your friend.
I was called up for the umpteenth time by one particular startup. One of my ex-workmates is running R&D there, and he must've given them an amazingly glowing reference for me - he rang me out of the blue for a chat one day, invited me to lunch and I found myself at a sort of "reverse job interview" where various execs sat around the lunch table telling me what a great place it was to work, what incredible things they would be doing in the future, etc. and wanting to know how I could possibly refuse to work there.
Anyway, they've rung me up several times since - I suspect as new rounds of funding come through - and their last offer to me included good old stock options as an incentive. They're planning to go public in the next year or so, and wanted me to sign on now for the promise of wealth beyond my wildest dreams at some unspecified future date.
It was like being in a time warp, and gave me a bit of a chuckle; unfortunately these days I'm not really interested in working for a small salary while having the promise of a huge payday dangled over my head at some vague date that's somewhat out of my control.
No, not the options themselves. But the whole fight about expensing options.
Options never needed to be expensed; any dilution from option grants shows up on the bottom line and any analyst with two brain cells to rub together can tell the difference between "earnings" and "fully diluted earnings"
But folks (including many people here) cried out in favor of expensing them, and in doing so, ensured that Mahogany Row (i.e. senior management and executives) is now the only part of the company has a realistic chance of getting an option-based lottery ticket, let alone winning with it.
If you're Warren Buffett or Bill Gates, that's just fine: less folks getting rich means more room at the top. If you're the government, that's also just fine: less chance of Joe Sixpack retiring early on a long-term capital gain (or effectively tax-free via an IRS section 83(b) election) means more tax dollars as restricted stock grants are taxed just like wages. If you're Joe Sixpack (or the Fred Winecase hiring them) and either of you are in the business of busting your balls to build something and motivate yourself and/or your employees, however, you're outa luck.
So be careful what you ask for -- because given half a chance, FASB will give it to you, and they'll give it to you good and hard.
I believe that the problem is that there are a lot of other areas which need to be addressed first before stock options are even considered. First (and foremost in my mind) is health insurance, dental insurance, vision, and so forth. My wife and I are having a hard time trying to decide on what kind of insurance to get. This is because of the $1,400.00 she is bringing home, almost $400.00 of that is presently going towards insurance.
After looking up insurance, sure you can get $200.00 med insurance, but then it has a $10,000.00 deductible on it! Since we pay out maybe $2,000.00 a year max for medical costs this doesn't make sense.
Coupled with the rising cost of gas, electricity, and food in general - the average joe is thinking more along the lines of "Am I going to have enough money to even eat?" let alone think about stock options which, in some cases, are better used as toliet paper.
Speaking of taxes (as per the election where everyone kept saying that they were not going to raise taxes to pay for everything) - think of this: Every time the feds print more money it is an invisible tax upon you. Because the more money there is in circulation - the less that money in your pocket/bank/whatever is worth. So Mr. Bush doesn't have to raise taxes - he can just print up some more money and ta-da! You have just been taxed! And ya know what? They don't even have to ask Congress for permission to do so.
Someone put a black hole in my pocket and now I'm broke.
Just as companies had to give in on a lot of employee demands back when you could flip jobs as easily as a hamburger, once the boom was over they had control again. And if there's one thing you can count on in life, a company with control will use it:
"Many of these companies, looking for ways to reward service or pay executives their just perks, are favoring restricted stock, according to a study released last month. Restricted stock comes in a number of forms and with different names, but all versions require continued service by the employee. Stocks or cash tied to business performance are gaining prominence."
Yup, it's the old 'performance' game. "Sorry, Smithers, you did good work, but the market hit us hard this year so your bonus will consist of this Burger King coupon and a pack of Doritos. Good job, son." When companies can tie things to performance, it's good for the company. No random stock giveways so that even the slackers cash out while the company isn't making a dime. Now if the company does well, you can do well, unless you're poor Smithers.
"A U.S. accounting standard that requires companies to book stock options as an expense is expected to be made final before the end of the year by the Financial Accounting Standards Board (FASB). "
Aha! The other reason! Yeppers, one other immutable law of nature: A company will never do anything that costs them money. Everything they do, even the seemingly nice things, is designed to make them money. So stock options are costing them more? Buh-bye stock options.
At my previous job we would work 10 hours days regularly, deal with customers yelling as us because a product was broken. Which we really couldn't disagree with becuase we had told the company it was broken before it shipped, but it had to be out by that date because some salesman asshat decided to promise it to the customer on that date without consulting engineering and/or integration; and, of course, the company would never miss a ship date and make the salesman look like the idiot he was.
This all got worse as the company did worse and worse, and its stock slipped under a buck. Not only did the company not offer stock options, no one would have touched them anyway. The real kicker was that we had not seen a raise in three years, but we had seen several CEO's (6, I think) get hired, serve for a short bit and then be let go with a generous severance package. In the end, the company did a re-organization and tried to get the Customer Support and Integration departments to move to San Antonio, Texas (I live in Southern California), with the exception of the least trained tech, everyone told them, "hell, no". As for myself, they offered me a somewhat ambigious position in the Engineering department, which was to stay in So. Cal. I was to do software testing and development (at a very basic level), support the local network, and whatever else they threw my way. Oh, and I would have to field support calls that the utterly untrained staff in San Antonio couldn't handle (a.k.a. all of them). I was told that I would get some sort of raise out of this, but for 4 months running, and right down to the last month before the re-organization was finalized, no one could give me any sort of number. So, I found a job elsewhere. I started at a higher pay, by a pretty good jump, the stress is way, way, way lower, and I actually enjoy what I am doing. Plus, the prospect of regular raises are much higher.
In all, the IT sector is still alive and kicking, you just have to keep trying; and don't be afraid to tell your current company to go fuck itself.
Necessity is the mother of invention.
Laziness is the father.
Once upon a time I had several thousand shares of stock options with my old company. I shudder to think how much money I could've made had I blown the wad at the right time... Easily 10's of thousands.
Could've.
Back in late 2000 it ran all the way up to 40-something, rung the bell, and then cratered. The whole time I made the mistake of holding onto them out of some odd form of loyalty.
My biggest tip to those that have them, DO NOT hesitate to excercise them when the stock runs up. A sunnier day might come, it might not.
As it stood, when I was laid off my options were underwater and not worth the paper they were printed on. I've since lost them, but last I checked they were still underwater.
Easy come, easy go. I would not take them instead of a hard raise.
I work for a personal bank, privately held where the employees can purchase stock in the company. Most if not all of the employees avail themselves to this option. Its funny when they brought on a new board member there was no non-employee stock for them to give to this board member. Its a great thing working for a place where the list to get stock is longer then the list of employees and anytime an employee sells any part of his or hers, its a large increaces in the price compared to the actual price/share. It will help pay for a house some day for me
Programmers are a lot like lawyers, value-wise. Like lawyers, the value of programmers is, or traditionally has been, their creativity and intellect. Better tools have reduced the value of that personal asset in programmers, but not eliminated it.
It is notably different from most engineering in that the products do not require large capital to distribute, once the creativity is complete.
In this manner, I have often wondered if programmers would work better in limited liability partnerships rather than corporations. A small group of programmers who produce on contract to corporations would be, if well organized, very valuable.
The corporate structure lends itself to growth in traditional economy, whereas a larger programming companies have, in my limited experience, not been efficient. There are exceptions, like Electronic Arts, I think.
But the hierarchical view of corporations, looking down upon employees, is flawed in the programming world because the direction of the company is often better felt by the programmers themselves, and management has often had a terrible disconnect from the technical reality, and a tendency to dictate where they should listen. Good management isn't necessarily this way, but many people cling to this management style.
In a partnership, the partners would be responsible for bringing in clients, the design, the programming, and the effective reuse of code. In a corporation, they are typically responsible only for the programming. I believe savvy programmers would be much better at selecting appropriate clients and choosing the direction of the code. I believe, when it comes to the effective reuse of code, a partnership would have better structures adopted to accommodate it.
This sort of delegation among partners has been very effective, in my opinion, in lawyer partnerships. I believe the effectiveness could translate into programmer partnerships. Mind you, moving programmers into management positions in companies may have the same effect, but I think the hierarchial structure inherently causes problems. The distinguishing feature being that in a partnership, management would also be programmers, and vise versa. There wouldn't just be a "delegation to programmers" by management, so to speak.
Just food for thought.
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.
As one of many who briefly had a small fortune in stock options in the late '90s, I can tell you from experience:
Options ARE NOT, ARE NOT grants.
Grants are GIFTS of stock outright. Options are the odds that the stock will sell at a lower price than the strike price when you exercise them.
EVERY single person I know is underwater on their options. Every Single One.
Options are essentially worthless in this market for the forseeable future. They were a useful tool to attract people by offering them a great deal of other peoples's money in the future.