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Job offer with stock options

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mogravy
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Job offer with stock options

Postby mogravy » Mon, 17 Aug 2015 5:57 pm

I just got a job offer that is supposed to have stock options as part of my compensation, but it is not mentioned on the offer letter anywhere. The hiring manager insists that is not their process and that the info is in an e-mail (e-mails exchanged between him and I during negotiations) which is considered binding.

Is this normal? Every job offer I have received that came with stock options or RSU's have included all the details such as no. of shares, strike price, grant date, vesting schedule, etc in the offer letter.

Thanks.

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JR8
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Re: Job offer with stock options

Postby JR8 » Mon, 17 Aug 2015 7:19 pm

The first question for me is are they considered variable/discretionary? For example are they dependent on the annual corporate results and your performance? Or are they guaranteed? ... Either way if they have been explained part of the hiring package I'd expect to see some reference to them and how they work, and importantly, that you are hired as a member of that (x, y, or z) scheme.

I always considered remuneration a very serious matter, all written down and signed, esp. after the first time I did a relo 'on a promise', and got short-changed.

As an example, this is how it worked at my place. You had your salary, and you had the chance of an element of variable compensation on top. I never 'mentally banked' any of the latter, as it was geared off the performance of the whole department (the Debt trading division of a global bank). But I knew that in outline that my annual bonus would be geared off that performance, or return on equity, (the group ROE%), further adjusted for my perceived performance within the group, further interpreted via a prism of who was this quarters golden boy, and further still who they feared might OR wished to quit, and who was doing the most successsful butt-licking of the dept heads. Through to AVP level, it was paid out wholly in cash. The contract explained the base meachnism but not the politics of the above.

From VP and on, that was when you started getting non-cash 'Variable Incentive Compensation'. That meant Stock, Options etc. So a department got a $x pool for the annual bonuses, that would be comprised of cash, stock, options etc. At year end when they told you your personal bonues (if any!!), they'd say, for example: 'you've been allocated $10k, of which $5is in cash, $5 in restricted stock'. The stock was restricted (I.e. cannot sell) for 3 years. It's cash equivalent value was calculated based upon the stock price right before year-end, something they obviously couldn't tell you in advance. Options came in at the top of the VP level band; it was a broad band. The 'strike price' again was not something they'd know months in advance, but the method of determining it would be. For example: the strike might be '50% of the NYSE closing price of the company stock on xx Dec 19xx, and subsequent years'.

Anyway... [sorry, rambling]. I think there are two phases, one they can tell you precisely the mechanism at which the value of non-cash awards are arrived at, I'd expect to see it in a staff handbook. Two, they cannot (obviously) tell you what they price/value of their stock might be come bonus time.

I'd still be cautious though with 'It's explained in our earlier e-mails'...imagined reply: 'well, where?'

At VP+ there were seperate bonus pools, like LTICP (Long-Term etc; locked in for up to 10 years). The size and opaqueness of the schemes increased the higher the rank...

Either way, a final 2c. Restricted bonus awards sound incentivising and good on paper, but keep in mind that they're worth toot if some time pre-vesting the company goes tit$-up. I've seen many people have their imagined futures/retirements dashed by this. The same happened at Lehmans, Barings, Enron. Now I know why some of the top guys tend to be unembarrassed to sell out their tied-in bonus awards as soon as they vest. They explain it away as diversification of their personal financial holdings, of course. I'd tend to look at it as common sense and insurance vs too many eggs in one basket.
'Do it or do not do it: You will regret both' - Kierkegaard

mogravy
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Re: Job offer with stock options

Postby mogravy » Tue, 18 Aug 2015 2:58 pm

JR8 wrote:I always considered remuneration a very serious matter, all written down and signed.


Thanks. Exactly my thoughts.


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