[jegutman]

I actually disagree with the 10yr time frame (although will admit it has its merits), but also agree with some of your logic. I just think that the 10yr "fix" solves some problems and creates others. I think this issue is that you should: A) not rob former employees of accrued stock value B) probably try to somewhat reduce incentives to leave if the company is going to continue to do well

There are a few problems I see here: 1) stock option grants are completely arbitrary and sometimes end up very wrong 2) it's hard to fix that in the future because you'll end up at a higher strike price 3) end up being expensive and tax inefficient to exercise

The closest I've seen to people who seem to get this and have sensible solutions are Andrew Mason at Detour (progressive equity) and Dustin Moskovitz at Asana (larger grants, but back loaded into years 4-6).

I have great respect for Adam D'Angelo at Quora for suggesting a solution to the problem, have known him in school he's certainly smarter than me on almost every axis of intelligence, but I think there are other potentially creative solutions that might be better (although I don't know tax compliance).

For example I think you could keep the status quo, but offer the option for employees to exchange their options for shares (white meat) at the time they can exercise. Example you have options for 100 shares at a strike price of $50, at the time you leave the shares are worth $100, instead of having to come up with $5000, you just get $50 shares free and clear. I think there's still a tax hit issue, but at least it's not doubled with paying for the shares.

[argonaut]

There's a huge tax hit. Giving shares is taxed as ordinary income.

[lmm]

All of these things should be taxed as ordinary income. Companies shouldn't be able to do an end-run around taxation by giving you valuable stuff instead of giving you money directly.

[argonaut]

Companies are not doing an "end-run" around taxation by using the tax codes as they are intended to be used when granting stock options.

In fact, I was pointing out that the poster I was replying to's complicated scheme was actually an "end-run" towards paying way too much in taxes.

[rplst8]

> Companies shouldn't be able to do an end-run around taxation by giving you valuable stuff

They already do in the form of health and retirement benefits.

[humanrebar]

And tying an individual's future (health insurance, retirement, immigration status) to an employer is a bad thing.

[chimeracoder]

> And tying an individual's future (health insurance, retirement, immigration status) to an employer is a bad thing.

Retirement isn't really 'tied to an employer', in that you can still open an IRA without an employer[0], or use a non-tax-advantaged account for retirement savings (most people outside the military or government service use non-tax-advantaged accounts for at least a portion of their retirement, since the IRA and 401(k) contribution limits are too low for most people to survive on during retirement).

This might have been different 50 years ago, where employer-driven pensions were more common, but today, the only real way your employer impacts your retirement is the 401(k).

The purpose of both the IRA and the 401(k) is to provide people with an extra incentive to plan for retirement. Putting away $450/month towards your retirement[1] can be unpleasant, but if you're getting, say, $90 that back (in the form of lower tax withholdings/taxes due), it makes it a bit easier, because that's effectively only $360 out-of-pocket.

The incentives work similarly for the 401(k), except the tax savings work out for the employer as well, meaning that they are incentivized to give you some portion of your compensation in the form of 401(k) matching (ie, they have an extra incentive to nudge you towards saving more of your own money for retirement).

Personally, I do believe that, if you do not have access to a 401(k) through an employer, your IRA contribution limit should be raised by $17,000 (which is the 401(k) contribution limit for individual contributions). But without employer contributions, at most that's saving you less than $6,000 - and that's if you're already at the very top marginal tax brackets (even making $100K gross in NYC, the most heavily taxed jurisdiction in the country, won't be taxed at 35%).

[0] Well, you can't contribute more than your total annual income to an IRA, but if you're making less than $450/month and living in the US, retirement planning is not your most immediate problem.

[1] ie, enough to max out your IRA contribution limit

[st3v3r]

Sure it is. But Universal Health Care in the US isn't gonna happen anytime soon, so this is what we've currently got to work with.

[lmm]

Where I live health benefits are taxable. There are tax incentives for pensions (presumably intended to encourage saving?) which I guess I oppose too.

[st3v3r]

And now we're back to the same problem we have with the 90 day window.

[jegutman]

It's not giving shares, it's a share exchange. Again I'm not an expert, but I've seen these types of arrangements before and somehow they got reasonable tax treatment because they were spelled out as such in the original grant (so nothing had actually "changed" at the time).