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The Almighty Buck Businesses News

Employee Stock Options? 358

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."
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Employee Stock Options?

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  • by fembots ( 753724 ) on Tuesday November 09, 2004 @08:36PM (#10771999) Homepage
    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.
    • by mordors9 ( 665662 ) on Tuesday November 09, 2004 @08:46PM (#10772109)
      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.
      • by Anonymous Coward on Tuesday November 09, 2004 @08:57PM (#10772238)
        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 dunno... i've had it work for me, but i did the most important thing.

          i sold, and didnt get greedy.

          but the key is - you must SELL, and then, place it in a nice conservative investment vehicle like a house.

          i've heard too many horror stories of people who were up 300x, and didnt sell. people who could have *retired comfortably*, yet didnt sell, and lost just about everything in the crash.

          i'm a big fan of options, and the stock market in general, but you absolutely, positively must know when to take mone
        • by ThousandStars ( 556222 ) on Wednesday November 10, 2004 @10:44AM (#10776372) Homepage
          You're essentially getting paid in risk rather than money.

          Exactly. The higher risk implies at a higher reward. During the dotcom boom, though, that risk seemed low.

          Keep in mind as well, however, that stock options show up differently in accounting land than regular compensation. That's why so many small and not-so-small companies like stock options: those options don't come directly out of cash flow, and if that cash flow never quite materializes then the investors aren't out as much. And if the cash flow does materialize, then the employee makes a tremendous amount of money. Everyone wins. Or at least that's the theory.

      • Or you could just put the bonus in a decent savings fund and be much better off than with stock options for a single company.
      • This leads you to accumulate wealth rather than piss it away on the latest doodad or geegaw.
        I am more than mature enough at 31 years of age to manage my own funds. I don't need my employer to lock them away to keep them from burning a hole in my pocket. I prefer employers who match investments in a retirement fund.
    • I'd say in a lot of cases, stock options are a good idea. If I was working for a small company that I believed would succede, espically if I was in a position where my work directly influenced the result, I'd probably be willing to take some options instead of cash. Not all options, I need money to live on, but if it was enough to support me comfortably, I could very well see forgoing the extra money in favour of a potential payoff.

      The real question is if the company has a solid plan that looks like it wil
      • If you need money to live on, you shouldn't rely on the possibility of a cash bonus at the end of the year. A lot of companies have "guaranteed" bonuses of 5% or 10% of your salary. That is just another term for "deferred compensation" which helps the company because rather than paying that 5% or 10% to you over 12 months, they hold on to it and earn money on it and then give it to you. You are basically lending your company 5-10% of your salary interest free.

        In the past few years bonuses at my company hav
    • 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.

      There are many quickly growing companies that do not have profit because management has decided to reinvest it.

    • jack shit, I personally won't mourn the loss.
  • Please.. (Score:5, Interesting)

    by Uhh_Duh ( 125375 ) on Tuesday November 09, 2004 @08:37PM (#10772019) Homepage
    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.
    • Re:Please.. (Score:5, Insightful)

      by TamMan2000 ( 578899 ) on Tuesday November 09, 2004 @08:53PM (#10772199) Journal
      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.

      • Re:Please.. (Score:5, Insightful)

        by coreman ( 8656 ) on Tuesday November 09, 2004 @09:24PM (#10772488) Homepage
        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.
        • Re:Please.. (Score:3, Insightful)

          by servognome ( 738846 )
          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
          Though you probably were not worth what you got 5 years ago due to labor shortage. High pay in the 90's led to everybody getting an IT degree/certification to cash in, which has caused excess labor now. Don't expect things to be as rosy as they were in the boom times, but it should get better than it is now.
          • YOU WANT TO SEE ECONOMIC BOOM? I'll tell you how it gets done. All hi-tech folks should just boycott work for 1 week. The stock market and every other management person will find that they cannot live 1 day without hi-tech assistance.

            When we all get back, we'll all demand raises. If it doesn't work out, let's go on another 2 week boycott. Repeat until every industry know our value! Financial tycoons rule with their money. Military dictators rule with guns. Techies rule the world... somehow that hasn
      • Re:Please.. (Score:5, Insightful)

        by theLOUDroom ( 556455 ) on Wednesday November 10, 2004 @12:12AM (#10773658)
        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.
      • Re:Please.. (Score:3, Insightful)

        "On the contrary, they have to pay you exactly what you are worth"

        BZZZT! Wrong answer.

        They pay you exactly what they THINK you are worth. I'm not saying inflate your resume artificially, but certainlly fluff it up, work any connections you have, etc.

        I'm a good example of this. I have managed to stack my resume through college, plus I am creative enough to talk it up, and I interview extremely well. I have managed to not only get job offers, but have asked for more money and been approved.

        I say this not

    • Re:Please.. (Score:4, Insightful)

      by Marxist Hacker 42 ( 638312 ) * <seebert42@gmail.com> on Tuesday November 09, 2004 @08:54PM (#10772209) Homepage Journal
      Heck, no longer includes options is the least of my worries- no longer includes health insurance is becoming just as common.
      • That's the truth for me. It wasn't even a thought until I started complaining that I couldn't afford health insurance on my salary, which was already less than market average. Buncha bastards.
    • "Do we need to go back to Economics 101 ??"

      Perhaps you do. When the job market gets tight employers will offer less and less because they know you cant go anyplace else.

  • And they're worth about the same.
    • Bingo. STock options were a way to pay people in the future of the company: they were used to give wildly underpaid employees, and investors, something on paper. Unfortunately, they're only valuable when the company's stock value goes up.

      Now look very carefully. The only people who can sell them when the company makes its IPO are VP's. The employees are prevented by lockout periods from selling them when they are most valuable, right after the IPO or when they have some value left, right before the company
  • by Anonymous Coward on Tuesday November 09, 2004 @08:38PM (#10772028)
    ...is not getting the job outsourced to India.
  • I work for one of the 'big five' consulting firms and I was award options when I started in June.
    • I work for one of the samll five and it always feels like I'm in stocks.
    • The company I worked for gave 100 shares (~$8000) to anyone who completed a degree through the employee degree program. The offer was good for all full time employees (shop, clerical, engineering), for any acredited degree (some peeple when to the culinary institute 45 minutes away). That program was the best reqruiting tool they had, Everyone I knew who was under 30 and working there, signed on because of the employee scholar program. They have cut back some in the last two years, but the program is st
  • by Anonymous Coward
    Now that you have to expense the options, they actually cost the company bottom line.
  • Taxes... (Score:5, Insightful)

    by Duncan3 ( 10537 ) on Tuesday November 09, 2004 @08:42PM (#10772076) Homepage
    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!
    • Re:Taxes... (Score:5, Insightful)

      by hazem ( 472289 ) on Tuesday November 09, 2004 @08:46PM (#10772126) Journal
      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 doesn't cost them much today. But tomorrow, when they need to raise more capital, the market will not value their stock as highly because potential investors will be afraid of being dilluted again. If you can't get enough capital, you have to go for loans/bonds.

      It's easy to cheat in a one-turn game. But it eventually catches up to you when you have to keep playing.
  • Freelance (Score:5, Insightful)

    by conner_bw ( 120497 ) on Tuesday November 09, 2004 @08:42PM (#10772078) Journal
    I went freelance and am doing better than I ever did at the companies and corporations I worked for in the past.

    Stock options are like a carrot on a stick as an incentive to win the the equivalent of the super bowl. I don't know how great you think you or your team are but there are as many adequate players on every other team out there. It's rare you can win, but it's an easy way to screw you out of your full pay check.

    Why would you want "gambling" as an incentive?

    • by NotQuiteReal ( 608241 ) on Tuesday November 09, 2004 @09:23PM (#10772485) Journal
      I too am doing well as an independent contractor.

      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.

      • by SubliminalLove ( 646840 ) on Wednesday November 10, 2004 @12:21AM (#10773719)
        This is slightly off topic, but what the hey, karma is for burning.

        I'm a college undergraduate with about $16,000 a year disposable income, including what I pay for my education. And I do feel rich. I just got back from three weeks in Kyoto, and I'm spending December in Germany. I love what I study (computer science and the languages of the above-mentioned nations), I have friends all over the planet, and the work that I do (programming, and webpage translation for Japanese companies) is rewarding to me.

        If I can feel rich, as well as travel to exotic places, living below the poverty line, and you can't feel the same way about your own life when you're clearly making a couple hundred k, I really think you might take another look at your priorities. Because I'll probably never make even a small fraction of your income, but I already feel wealthy compared to you.

        • college socialism (Score:3, Interesting)

          by peter303 ( 12292 )
          When I went to college, my dollar went further because so many services are subsidized there. You get cut rate rent, food, entertainment, library, internet, education etc. When leaving college, the cash flow in my life nearly tripled, but I didnt feel better off because, the cost of living tripled too.
      • by jrumney ( 197329 ) on Wednesday November 10, 2004 @07:23AM (#10775109)
        I pay over 50K USD year in taxes and don't feel "rich"

        This is the mentality that causes CEOs to keep giving themselves pay rises. You've got a six figure salary which puts you at least in the top 5% of earners. You are rich, whether you feel it or not. Obviously money is not what makes you feel "rich", so stop trying to get more of it and look at other aspects of your life.

    • Re:Freelance (Score:3, Insightful)

      by LuxFX ( 220822 )
      I went freelance and am doing better than I ever did at the companies and corporations I worked for in the past.

      Ditto that. I kept losing every job I got because of incompetent management leading to the company going under. I finally started my own company, and make about twice what I did before, and I get to work from home where my wife and brand new baby boy are. Plus, I've kept at it about three times as long as my longest stint at employment.

      I don't see why my success should depend so much on othe
  • by mikael ( 484 ) on Tuesday November 09, 2004 @08:43PM (#10772085)
    ... 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?
    • ... Four years ago I remember reading in TechWeek that landlords were demanding security deposits in dot com share options, rather than cash.

      I spent the past five years in the Bay Area. I work for one of the biggest internet companies in existence and 70% of my income is in stock options, so I'm well aware of both stock option and real estate insanity.

      I have never, ever heard mention of the practice you describe. Certainly not when I was renting (and I checked out virtually every apartment complex in S
      • I did a keyword search - looks like it was targeted at companies, not individuals...

        From Guidelines for Landlords [akingump.com]

        The issuance of stock options and/or warrants to the landlord by the tenant became a new means of paying security deposits and/or paying rent. The issuance of the stock options to the landlord in exchange for a security deposit or a reduction in rent means that the landlord, or its lender, has the opportunity to acquire, at a fixed price, an ownership position in the company. This ownership p
      • Bussiness landlords. I could see that. Landlord sees all the .bomb stocks skyrocketing and gets greedy. So when one wants to move in, wants payment in stock, figuring he'll make out like a bandit... Which he would if he cashed out at the right time.
    • I worked for a company that paid its rent in options, but not because the landlord wanted us to - it was because we had no cash, and it was all we could afford.
  • Stock _awards_ (Score:3, Informative)

    by Anonymous Coward on Tuesday November 09, 2004 @08:43PM (#10772087)
    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.
  • by JanneM ( 7445 ) on Tuesday November 09, 2004 @08:44PM (#10772098) Homepage
    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.

    • > I don't really see the great charm of stock
      > options, specifically as part of your employment
      > renumeration.

      Actually, there is one case where I can see the big advantage of holding options - when you're actually running the show and therefore hold a high degree of control over when things happen.

      If you're the person who can:
      - hire true experts,
      - fire the losers quickly
      - are deeply involved in when things happen
      - know when significant slabs of money are likely to become available,
      then you're in
  • by Wizarth ( 785742 )
    I like how we do it here. When income goes up, so do the wages. Could make it interesting if/when profit goes down again though.
  • My company does it (Score:3, Interesting)

    by jaymzter ( 452402 ) on Tuesday November 09, 2004 @08:45PM (#10772105) Homepage
    Over 600 shares for attaining RHCE or a similar certification. The trouble is that they drag out the time when you can actually sell the shares. I hope they're still in business then... ;-)

    Personally I'd rather just get a straight bonus than something of dubious value like stock. To me an RHCE isn't so much a marketable item than a validation of a person's skill set (flame suit on!)
  • by darnok ( 650458 ) on Tuesday November 09, 2004 @08:46PM (#10772110)
    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.
    • I know someone who got stock options in a company before it went public. He was already doing well, so he decided to go for it. Well his gamble paid off; the stock was worth quite a lot after a few years, and when he got the opportunity to sell 10% of the stock, he jumped at the chance. By the time the dust settled he ended up with a little over $5 million in his bank account and 90% of the original stock still in the market. This was back in the late 90s so I have no idea how much money this guy is wor
  • by Tackhead ( 54550 ) on Tuesday November 09, 2004 @08:46PM (#10772115)
    Careful what you ask for... you just might get it.

    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.

    • If you're the government, that's also just fine: less chance of Joe Sixpack retiring early on a long-term capital gain

      When companies grant stock options to employees, they typically grant non-qualified (also called non-statutory) options. In most cases, the fair market value of these options can't be readily determined since they're not traded on an exchange and they typically come with restrictions like vesting schedules and non-transferability clauses. As a result, you don't pay any taxes on them when

    • Options are a huge cost for many corporations and a huge benefit to executives. No wonder, then, that they have fought ferociously to avoid making a charge against their earnings. Without blushing, almost all C.E.O.'s have told their shareholders that options are cost-free.

      For these C.E.O.'s I have a proposition: Berkshire Hathaway will sell you insurance, carpeting or any of our other products in exchange for options identical to those you grant yourselves. It'll all be cash-free. But do you really thin

  • by Audacious ( 611811 ) on Tuesday November 09, 2004 @08:46PM (#10772119) Homepage
    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.
    • So Mr. Bush doesn't have to raise taxes ...

      Plus the fact that deficits are taxes levied against future taxpayers. Some of us will be dead so we can skate. Others (such as our children) won't be quite so lucky.

    • > 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.

      It doesn't?

      $200/m * 12 = $2400/y. Plus $2000/y medical cost. = $4400/y.
      $400/m * 12 = $4800/y. Plus your current (I'll be generous and assume zero) deductible.

      You're already prett

      • >> But even in the short term, you come out ahead to the tune of $2800/y, and as a bonus, your doctor probably thinks of you as his best customer -- because you pay for his services upfront, and he doesn't have to spend $25 worth of his office workers' time filling out the forms that would ordinarily be associated with a $100 checkup! You win. Doc wins. Insurance company loses.

        Even better, find a doctor that has decided to go off the "insurance wagon". I've read about them in the past year. There
      • Self-insurance is a very bad idea. As others mentioned, just get insurance with a high deductible. The costs are about the same. And you never know when unexpected medical charges will come up. (e.g., my wife recently found out she had breast cancer. $70k in doctor/hospital fees later, she is cancer-free. But I shudder to think what would have happened to us financially had we been "self-insured" (which is actually just not insured.))

    • 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.

      Actually, taking the large deductible insurance plan makes more sense than you think.

      Based upon the nu
  • We all just had our annual reviews and got very modest raises - 1%-3%. But, the same week they announced our new health insurance plans and rates for 2005. Our costs per paycheck have DOUBLED (for not nearly as good a plan, I might add) and I quickly calculated that my take home pay will be LESS once the raise takes effect due to increased health insurance rates. To this, all I can say as a USA citizen is...Oh Canada! At this rate I'll be moving there soon.
  • by FunWithHeadlines ( 644929 ) on Tuesday November 09, 2004 @08:46PM (#10772127) Homepage
    In the dot-com boom, stock options were thrown around like crazy. I had 3000 of them myself, once upon a career, and on that job I was just a peon. Didn't wind up being worth anything because they kept delaying and delaying until the bust took over and made it a moot point. Then the company went under, making the point even mooter. (Mootest?)

    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.

  • Ok Slashdotters, now is your chance to chime in and help me. I know how selfish, shoulda sent it to askslashdot. Anyway,

    My company just recently (this monday) announced that it will begin offering a Employee Stock Ownership Plan soon. I'm a young sysadmin who's parents recently passed away and I'm not experienced enough with this stuff to fully understand it and dont really have anyone to asks about specifics.

    Does this mean my company will become publicly traded? I'm told my percentage of the company is e
    • "Does this mean my company will become publicly traded?"

      Perhaps. They might be issuing non-registered securities as part of a private placement and providing a way for the employees to 'get in early.' Be VERY careful with this. (and good luck trying to sell any of it if your company does NOT go public. Talk to a lawyer to find out why).

      If this is anything like my company, you are being issued 'common shares' while the real investors (and executives) are being issued 'preferred shares.' The differences
    • Talk to your accountant and solicitor. If you don't have them, hire some and talk to them. Oh, and don't use the same accountant/solicitor that your company or its key shareholders use; they should tell you if that's the case, but check yourself to be sure.

      Business plans typically are full of best case scenarios - I've written a few of them myself, and have occasionally been told to "gild the lily" a bit in order to get the people putting up the money (in my case, banks; in your case, it's you!) excited
  • by Sylver Dragon ( 445237 ) on Tuesday November 09, 2004 @08:49PM (#10772154) Journal
    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.

  • by Rathian ( 187923 ) on Tuesday November 09, 2004 @08:49PM (#10772160)
    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.


    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.
    • My old company awarded stock options all the way down to the lowly shipping clerk.

      Through varous mergers and splits, I was literally a millionaire. On paper. Of course, doing a same day sale meant getting assraped by the IRS. So I looked at it as potentially paying for my kids' college.

      Some of our best engineers hung on until they were half-vested, and RETIRED. In their 30's.

      Due to timing, etc. I wasn't positioned to retire. (people who were in one of the bought companies got a really sweet deal throu
      • And now, I realize just how pathetically little, a million dollars really is. I look at movies from the 1970's where the plot was someone pulling off a robbery, or murder, for like $10,000. Dude, $1 million won't change your life in a way that's measurable 5 years out.

        $1 million put into safe but low-yield investments would give me my current pittance of an income _forever_, _after_ inflation. $2 million would let me retire in modest comfort.

        So, while $1M won't make you _rich_, it's still a very respecta
      • I could live 10 years at the same comfortable level of life I currently have. Without moving a single finger (and this assuming high taxation and that the money earns 0% interest).
    • Well, the trick is to sell a little of all of the stock you have acquired / partially been given every time the market looks up.

      The thing is, stock is preferentially taxed. So it can be useful. It's just not something that you'd want to count on.
  • by j0217995 ( 597878 ) on Tuesday November 09, 2004 @08:53PM (#10772197)
    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
  • by drewzhrodague ( 606182 ) <drew.zhrodague@net> on Tuesday November 09, 2004 @08:54PM (#10772207) Homepage Journal
    Every single hundredth of a stock option that I was ever offered, has proven to be $20 out of my own pocket. Most companies who offered me these weren't even around long enough for me to vest, or the company would "outsource" the department -- conveniently, just before the vesting period.

    But what to do when a company is offering stock options? Since I'm looking for work, I just not and smile, rather than give them a piece of my mind.

    Then again, it has been a while since I went on an interview. BRB, gotta send out another couple thousand job applications... I track and rate the recruiters I contact [zhrodague.net], shouldn't you?
  • by clone22 ( 252516 )
    In a meeting with a potential investor in a startup I was with, he made a great point: "It's easy to sit in a room with a bunch of other folks and delude yourselves into thinking you've got a great idea".

    So what if the company provides stock options? What are the realistic expectations the company is going to be successful enough for the options to ever be worth anything? Will your seemingly large position be increasingly diminished as new investor money dilutes the share pool? Would you be better protecte
  • still does. It's a ... convulted calculation, but you end up getting between 2-4x your monthly salary in stock at the end of the year. So if you make 5k a month, you can end up getting between 10 and 20k in stock; which you can sell immediately if you so desire. (They also have an end of year cash bonus equal to 1/2 of one months salary.)

    Here's a note to other companies: this stock bonus ploy keeps me working for them when I might otherwise seek other employment. Pay/treat your good people nicely, and they
    • No. Stock options are not stock. The company does not pay dividends, you cannot sell them at whim, and they're worth exactly nothing if the company value does not go up. It actually makes it advantageous for the company to keep the stock value low, bump it high with some faked up announcement so the the VP's can sell their options at a fraudulent value quickly before the employees can blink, then step out or even quit before the fraud comes home. Why do you think it's called "pump and dump"?
  • Incentive Structures (Score:5, Interesting)

    by debrain ( 29228 ) on Tuesday November 09, 2004 @09:02PM (#10772294) Journal
    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.
  • Historically, the startups that have done the best are those with broad based options programs. The reason is that a good option program:
    1) curtails employee turnover(i.e. folks like a winer and once a company hits its employees can move more easily).

    2) Organizations with extreme economic inequality are unstable. The legitimacy of leaders who are doing well when noone else does comes into question _real_ fast. When an management has no loyalty to employees, lots of nasty behaviors become commonplace--broad
  • Yes and no... (Score:3, Informative)

    by Razzak ( 253908 ) on Tuesday November 09, 2004 @09:04PM (#10772322)
    In the compensation field, this is the biggest topic. In the silicon valley compensation area, this is the only topic.

    At the end of the day, the CEO's pay will not change. As others have alluded to, you pay the CEO enough to keep him from going to another company, as he is the most important person (generally) who has the most significant impact on earnings. If he can make you a fraction better than your competitor and your revenues are $1BN, a few million in pay is worth it. This will generally hold true for the upper executives who report to the CEO as well.

    However, what about the little guy? The same holds true. They'll pay you what they think you're worth. Around the nation, it's not going to affect you that much. Pay is pay, and even if you get fewer options you should be rewarded in other ways (better stock performance due to the lower dilution, higher salaries/bonuses, etc). If you're not, there will be someone who will pay you what you were making before.

    If there isn't, that means you were overpaid because the company could pay you and not expense the compensation. Sorry.

    Here's the real kicker: ESPP's. Many companies allowed employees to purchase stock through ESPP's (Employee stock purchase plans). You could purchase stock at a 15% discount (so buy a $10 stock at $8.50) with usually a 6month to 2 year lookback. This was a huge source of income for many working at these companies. These practices will now be expensed, and companies will begin getting rid of ESPP Plans.

    So, let's say your stock has fluctuated from $10 to $15 over the last two years. It's currently at $14. You have a 2 year lookback, so you can buy at $10 with a 15% discount which equals $8.50. Think about it! You can use 15% of your salary to do this. Let's say you make $100k per year. You buy $15,000 worth of stock at $8.50 per share, or 1,765 shares. Assuming you hold these shares for 1 year and the stock price neither drops nor increases, you can then sell it at $14 per share. That's $9,700 in extra income you're losing by this plan going away.

    So basically, if people cut back your options or ESPP plans, demand a higher salary, higher target bonus, or a company car. If the company is unwilling to increase your compensation, then find someone who will.

    I'm not going to go into the tax implications of Rstock vs. Options and why companies do things a certain way. If you have questions, contact me. I'll put up a yahoo addy so the spam goes there. razzak()jallow(@)yahoo.com (no parenthesis)

    *Note: I'm not an advocate for or against expensing options, but I do feel it allows the non-expert investor to more easily compare performance across companies that grant options and those who do not.
    • Now, folks, notice the shell game this fellow just did. He succeeded in conflating ESPP and "employee pay over the minimum to get you is wasted" with stock options. These are each very, very distinct issues. The conflation and shell game are part and parcel of the stock sales game. The .sig is also nice hook to try and rope in some extra business from slashdotters who are convinced of the Stock options at the typical employee level are betting your man-hours, your hard-work and time, against the increasing
  • If they start handing out options like they did before they may create competition for themselves once the stock market goes up. How? Again, simple. Let's say you're hired into a large company. After years of economic downturn its stock is probably at the lowest point in years right now, probably at its global minimum. If you get stock right now, and tons of it, and your stock triples or quadruples in five years, you'll be "outta here" looking for shit to do on your own. This may as well create a threatenin
  • We're lucky we have Health Insurance.

    I think that's just how we're meant to feel, too.
  • If I had been buying stock options over the last 6 years at my work, I'd be loosing money. The merger is buying at 15 dollars, so when our stock was over 15, 80% of the time, where is the profit?

    If started buying stock the last 2 years when it was at 5-10 dollars, id be making a profit.
    So, the new people made money, the long term employees have lost money.

    Also, as for a yearly bonus, I have mixed feelings. The company uses bonuses as carrots, they inflate your pay, but you loose it when the company has po
  • My stock options at AOL are basically toilet paper.

    I got $72/share when I started there. When I left, I could opt to abandon them or go deeply into debt buying into a sinking ship.

    My current job is employee owned and we get a grant based on a percentage of our annual salary. Much more realistic.
  • While I was at Morgan Stanley, I think the company discount on the stock would be 15%. There was some heavy regulation, and process that you had to go through in order to purchase it however. Another thing that was part of the companie's policy: Employees aren't allowed to touch stock of companies that Morgan is involved with, so no google stocks for employees... Just my experience. Hope I didn't accidently leak any IP.
  • The company I work for has given options as compensation in the past, but they do it very rarely and I haven't had the opportunity to receive any yet.
  • by PeeAitchPee ( 712652 ) on Tuesday November 09, 2004 @09:29PM (#10772539)

    As one of many who briefly had a small fortune in stock options in the late '90s, I can tell you from experience:

    • ALWAYS take more cash before more options
    • Sell you options the nanosecond that you can, take the money, SMILE, and don't obsess on the share price
    • Immediately set aside 40% (or whatever your financial advisor tells you) of the proceeds to PAY THE TAXES due on what you just made! If you don't you are guaranteed to take it up the ass at tax time.
    • If you want to file an 83(b) election, make sure you do it at the beginning of the current year so you've got plenty of time ('til the end of the current tax year) to decide whether and when to sell some or all of them.
    • Pay the money for a decent CPA / tax advisor, who knows more about this you'll ever want to. AVOID the asshole "advisors" at the brokerages; all they want you to do is keep socking more funds into their firms and keep the commissions rolling in!
  • The beginning of this year I received a fair bonus in addition stock options, so no complaints there. However, they DID just raise the price of items in our vending machines by 25%, and I'm PISSED.

    Oh, and health insurance took an expensive turn for the worse. Seems like if they raise the prices of snickers and less people eat them, that health insurance would be less expensive.

    Some times I just don't understand the world.
  • This shouldn't be a suprise. After the Enron scandle, the Sarbanes-Oxley Act changed the way companies have to expense stock options, essentially making it more costly to fling stock options all over the place. Oh, when you said you wanted them to stop giving out so many options, you didn't mean that YOUR options were the ones that should be eliminated?
  • Run away screaming (Score:4, Informative)

    by gelfling ( 6534 ) on Tuesday November 09, 2004 @10:45PM (#10773079) Homepage Journal
    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.
  • A soggy deal (Score:3, Interesting)

    by Wansu ( 846 ) on Wednesday November 10, 2004 @12:43AM (#10773859)

    The last company I worked for gave stock options in leiu of higher salary. It turned out to be a soggy deal. Several of the ranking officers of the company were indicted on charges of industrial espionage and theft of trade secrets after raids on the corporate headquareters turned up source code they'd stolen from their former employer, a competitor. This and subsequent court rulings and announcements sent the stock on a wild rollercoaster ride. The situation for employees was made even worse by the onerous restrictions placed on the sale of stock which included requiring employees to use a company designated broker, thereby giving the company an effective pinchpoint to prevent lots of shares being sold at once. After frustrating rounds of phone tag, many gave up. Another restriction was a "blackout" period when sales were prohibited. These were 3 week time windows centered on the announcement of quarterly earnings.

    When I left, I was vested for about 1000 shares and had options on 700 more. But they were underwater and stayed that way until the options expired. Finally, the restriction to use their broker was lifted and I handed the certificates to my broker who sold them after a favorable court ruling caused the price to spike. I bagged $8k after taxes, chump change considering all the 60 hour weeks I'd put in there.

    I worked another place that gave large cash bonuses. It was a small place with spartan benefits. You had to pay 1/2 your health insurance, for example. This bonus was based on how well the company did that year and the president's perception of your contribution. This created some interesting office politics. One miscue on your part, spotlighted by "concrened" coworkers might overshadow a whole year's worth of solid performance. Then there's the tax bite. Chawmp! It ain't like havin' a 401k. another disadvantage is that if you leave, you don't get a pro-rated portion of that year's bonus. At least the options are portable.

    Both stock options and lump sum bonuses lean on you. When much is "given", much is expected. But in each case there is too much stick and not enough carrot. I prefer a competitive wage and a 401k to options and large lump sum bonuses.
  • Speaking of CEOs... (Score:3, Interesting)

    by cr0sh ( 43134 ) on Wednesday November 10, 2004 @01:58AM (#10774172) Homepage
    Just how in the world does one become one, anyhow?

    What company was it, recently (in the news), where the CEO was hired, "led" the company for 18 months, the board fired him, but gave him a HUGE severance package - upwards of 100+ million - that got the stockholders of the company in a tizzy and now they are suing the board (and the former CEO, maybe)?

    I'll tell you what - let me run your company - any company. I certainly can't do any worse than any of these other bozo's - hell, I bet I could do better. You can even have me at a bargain: make my salary $75,000 a year, and if I don't do good after a year, cut me loose with a $2 million severance package.

    Hell, that has to be a bargain - come on - someone out there needs a CEO, and I am serious!!! I will run your company, and you get my services cheap.

    It galls me - that someone can run a company into the ground over 18 months and be cut loose with a severance package that will dwarf my total lifetime earning potential. Idiots making bank - what kind of screwed up crazy world is this?

Logic is the chastity belt of the mind!