If the company has a few good quarters of stock appreciation, your employees are now effectively tied in ("golden handcuffs") and will not be able to get matching offers elsewhere.
This might be a cynical take, but in addition the things you typically hear, like improving cashflow and aligning incentives, I think it makes it easier to manage employees out. I.e., if you want to replace someone who it would otherwise be hard to fire, you could start refresher grants late or make them small enough that come year 5, it makes more financial sense for the employee to leave willingly.
Some explanation, in case people aren't familiar with "big N" or FAANG comp schemes: when you get an offer, you're given a "base salary"—somewhere between 100 and 250k unless you're quite senior—a four year RSU (stock) grant with some vesting conditions, and info on typical year-end cash bonuses and RSU refreshers. The annualized four year grant is usually somewhere between 50% and 200% of your base salary, depending on seniority. See levels.fyi for details. A "refresher" is a four year grant given in each of years n, n + 1, n + 2, ..., where n is typically year 2. The refresher is usually a quarter of your initial grant, but companies often given themselves a lot of legroom to adjust this number depending on market conditions, employee performance, etc.
I'm not from levels.fyi but I think some reasons are
* Its cheaper for the company than cash (stock is the company's currency, they can issue more of it, decrease the supply, use it as collateral in financing etc)
* It can be better for the employees (pay less in taxes, more opportunity for growth)
* Incentives become aligned (I now care about the continued success of the company more so than I otherwise would)
For employees you pay the same in taxes. RSUs are treated as income just in Stock based compensation vs USD. RSU vest is the same as taking a USD based salary and purchasing the shares.
The Employees do get the benefit that between the grant date and vest date, the RSU value could increase. And the employee gets the benefit of capturing that growth.
E.g. if 100k of RSUs granted, and 25% of it vested each year. Say in year 4 the value doubled. So they'd get 50k of RSUs and when it vests the employee is taxed as if it is income, and pays income tax on the 50k value.
Levels is showing that the average senior engineer at Netflix is only getting $11k stock though. If employees were allowed to choose what percentage stock they wanted, I'd expect most employees to choose a larger percentage than that.
Stock is likely to grow in value over the course of the year while cash is almost guaranteed to lose value due to inflation. You'd have to be pretty pessimistic about Netflix's future to choose the all-cash option. And even if you're only neutral about it, the stock is the better choice because it's inflation protected.
If I were a Netflix employee, I'd probably choose $200k cash, $300k stock. The fact that levels is reporting such wildly different numbers tells me employees don't actually have that level of freedom to control their comp.
You can always buy NFLX with cash in your brokerage account. It's not like you are going to get any discounts if you choose to receive part of your salary in stock.
If you're granted stock on a vesting schedule (even if its 1 year), doesn't it qualify for long term cap gains if you don't sell? So you only pay potentially long term capital gains.
versus
If you get cash, pay income tax on it, and then invest it, and then pay cap gains, that's another round of taxes you pay no?
Their compensation philosophy is to pay at personal top of market for most roles. That said, compensation packages can differ significantly on a case by case basis depending on candidate experience. What they may not capture in title / level, they capture in variance of salary.
One level, but different compensation. For SWE IC, it can range between 300k and 700 (plus in some cases). The same for higher levels, there is a big variance in comp. You can use up to full salary to get options (not shares) at 40% (used to be, I don't know now).
They pay market value. Let's say that you come to Netflix with a Facebook offer (or current salary), Netflix wants you, they pay >= FB offer or current salary. If you don't have any offer, they have tech-wide salary surveys that give them a market range for you.
Clearly, nothing is set in stone and a hiring manager can "bet" monetarily on some candidates (i.e., pay them more of what the data points would recommend). When I was there, I was making a (very generous) x and others in my position were making 1.8-2 x no doubt.